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One hand certainly doesn’t know what the other is doing, or do they?

November 4, 2009

I'm confusedOne hand certainly doesn’t know what the other is doing! I read a featured post this morning by Lisa Udy, “High Offers Offset by Low Appraisals – Fair And Balanced? Or Unfair?”. Lisa has pointed out a new trend, buyers who want REO listings and put in offers higher than asking price, only to “renegotiate” when the appraisal comes in. I suggest you read this post, it is eye opening as are the comments.

Reading through the comments I saw that some are participating in this tactic and see no ethical issue with this. Others think this is bad business. Many pointed out that banks are on to this tactic and put in the contract that the buyer is responsible to pay the difference if the house doesn’t appraise.

I am not here to debate the tactic, I was scratching my head and laughing. It is very obvious that one hand doesn’t know what the other is doing. The last 3 transactions I have had with buyers something new popped up with the mortgage. We never really had a clean mortgage commitment, up until closing date. Some banks have added a new requirement to the mortgage commitment. It says that the house needs to appraise at the time of closing. All contingencies were removed, yet this new one was added. What it meant from a legal standpoint?  According to my buyers attorney the mortgage contingency was indeed not really met. In all 3 instances the sellers attorneys understood this was as good as it gets and accepted the fact that it wasn’t really ever going to be clean until we closed the deal.

Quesion markSo, in the end it doesn’t really matter. If the lender sees the problem they can refuse to lend the money, the buyer will be unable to perform and the contract can say that the buyer is responsible for the difference, however if they can’t get a mortgage they can’t buy the property. I am obviously not talking about investors with cash.

Tell me, does one hand know what the other is doing? Or do they know exactly what they are doing?

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