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Monday, June 26, 2006

Walked Away From Closing On My New Property

I and the seller met at the attorney's office for our scheduled closing. We sat down with the attorney to review the settlement statement. The attorney went line by line through the statement identifying each line item. Everything looked good until we got to the appraisal line item.

The appraisal line was marked for $50. I stopped the attorney and said I don't think that is correct, I know the appraisal was suppose to cost between $300-$350. Didn't seem like a big deal, appeared to me to be a typo. The attorney recommended I call the lender to verify the fee before we proceeded.

I called the lender. I can't get an explanation. I am told the appraisal was ordered, and 6 days ago the lender called the appraisal regarding the status of the appraisal. The appraiser knew nothing about the appraisal order and the lender reordered the appraisal. Then apparently the lender canceled the appraisal and decided they didn't need it to approve the loan (the details at this point are fuzzy). None of this was communicated to me until I called the lender at closing.

I had been concerned with the appraisal throughout the entire mortgage process since I was purchasing this home FSBO. The lender had offered me a $50 waiver option to forgo the appraisal but I insisted that the lender get the appraisal done. I had followed up with my mortgage consultant via email asking about the status of the appraisal and received vague responses that indicated the appraisal was complete and I would get the details at closing. I never followed up to get confirmation the appraisal was indeed complete.

After getting a vague explanation from the lender that was initially very deflecting of blame or ownership of the issue I recognized I couldn't proceed with closing since this wasn't going to be resolved quickly. Employees of the lender was urging me to proceed with closing and the issue could be resolved afterwards, but I felt like they were trying to cover up a problem on the lender's end. My biggest concern was whether I was in some way breaking the contract and potentially exposing the earnest money I put up as part of the contract.

When I came back to the table and notified the seller I couldn't proceed with closing, the seller was understandingly irate. He tore up a document he was holding and stormed out of the attorney's office without any discussion about if/how we could proceed with closing. At this point I was very concerned about what the legal implications were on my part and what obligations if any the seller had to continue the sale of the property.

After talking with the attorney it seemed the best course of action is to focus on resolving the appraisal issue and then try to proceed again with closing. I hopefully can get a hold of the seller once they have calmed down to discuss trying to reschedule.


  • Why buy now? Housing prices are going to fall off the table.

    By Anonymous Anonymous, at 9:48 AM  

  • Sounds like you uncovered a rat!

    Based on the fact that they decided you didn't need an appraisal, AND based on the sellers reaction, I'd tread carefully on this one.

    If he really wanted to do the deal, he would want to work with you to get his property sold, not storm out of the closing.

    Good decision!


    By Anonymous Anonymous, at 11:11 AM  

  • Wow, you are much braver than most people! Yeah, I definitely think there is something up, especially since it is FSBO. Seems like they are trying to sweep something under the rug and are in cahoots with the lender to keep it under...

    Walking away is the best weapon a buyer has, I think, although it can be scary to use it.

    By Blogger Kira, at 11:12 AM  

  • Thank goodness you listened to the neon light flashing in your face. I do have one question though....Was your lender in anyway affiliated with this seller? He didn't refer them to you, did he?

    Of all the properties I have purchased and sold I have always received an appraisal that my bank provided (of course I paid). Some were cheaper, like in the case of a refi, they do a drive by.

    You did the right thing. I also agree with Anonymous' comment above, I think after September would be an awesome time to start looking and buying. Although, if you are in for the long haul you will be ok too.

    By Blogger Denise Mall, at 11:56 AM  

  • Good job man...I always tell myself, if something doesn't feel right, step back and take a deeper look.

    I agree with Grant...the fact that he was so upset makes me think something is up. If there's nothing to hide, then the appraisal should be a minor hassle that just needs to get done if you wanted it.

    By Blogger freedumb, at 2:34 PM  

  • Well done on being a tough guy. If they start tearing up paper over a few hundred bucks it seems extremely fishy..

    By Anonymous Anonymous, at 7:26 PM  

  • Sounds like you walked away from some bottomfishing schemers. Careful pursuing this one. I'd start looking for another house.

    By Anonymous Anonymous, at 1:05 AM  

  • I agree, you might be buying the house at an unreasonable price. From the looks of it, you might not be able to sell the house back, if I were you I would keep my CASH and keep on looking at property as the property price in the World is coming down.

    As for your deposit to the seller, it depends on the contract that you signed, whatever is stated in that contract you will have to abide by it, if it means losing your deposit, then it means losing your deposit.

    You wouldn't want a property that you could not sell if the economy were to fall off a cliff or if you were to lose your job.

    Property is a very illiquid investment, it can either break you or make you rich, but you seem to be swimming against the tide, when the property market price is at the highest you are buying. Does it mean you will be selling the property when the property price is at the lowest and you are pressured to sell.

    If I were you I would walk out of the deal and take my lossess (if it includes losing the deposit). But I would suggest you try to negotiate with the seller to try and get some of your deposit back (even if the contract states that your deposit is forfeit).

    Learn and live.

    Anonymous Millionaire.

    By Anonymous Anonymous, at 1:15 AM  

  • congrats!

    By Blogger Chris, at 5:05 AM  

  • Thanks for all the comments!

    I don't think their is any conspiracy - the seller and lender have no connections. The seller was understandibly irrate because he was confident it was a done deal and I was raising a new issue (that both of us had thought was finished).

    The lender on the other hand was trying to screw me. There was some breakdown on their part and it was never communicated to me. Not happy with Everbank at this point.

    However I am still trying to go through with this deal. Real estate is still hot in Raleigh and this property meets my requirements so I should do well will it regardless of how the market goes in the future. I believe I can rent it out for a positive cash flow when I am ready. Its a good oppurtunity for me.

    By Blogger 2million, at 1:30 PM  

  • a few quick points:

    1. not only was your lender trying to screw you, they were probably in breach of their fiducisary responsibility - did you discuss this with your lawyer?
    2. did you have a lawyer representing you? what was his oppinion of the issue and the lender's behavior and your recourse with the seller?
    3. always have a lawyer! don't try to save money by sharing one.
    4. based on the lender's behaviour, you may be able to assert that they are responsible for any losses you may have, such as unreturned downpayment.
    5. Being from NC, most earnest money is very small usually $1,500 or less. How much is at stake for you?
    6. The seller is emotionally involved in the deal. although it makes things tricky, you can work them out with him. he's more in love with the deal than with you.
    7. i assume you did your own market analysis to determine fair price and that your OK with the purchase price.

    Good luck, whichever way it goes.


    By Blogger makingourway, at 1:34 AM  

  • Sometimes thats the only thing you can do.

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