Dealing with Mortgage Brokers

[J Scott]

Sorry for posting a long story, but I'm starting to get exceedingly frustrated with the mortgage broker who is working for a buyer of one of my properties.

The short story is that he screwed up in forgetting to order a second appraisal, pushing the closing back about two weeks. When my agent (my wife) called him on the mistake, he got pissed and is now dragging his feet, not scheduling the closing, not returning either agent's phone calls, and now has apparently gone out of town for the week without telling anyone.

Here's the longer story (taken from my blog, so excuse some of the references that may be unclear):

The Second Chance House has been under contract for nearly 6 weeks now, and we’re about 3 weeks past the original closing date. The main reason for the schedule slip is that the mortgage broker forgot to order the second appraisal on the house until nearly two weeks after the first appraisal (and after the original closing date). When we called him out on the mistake, he got very defensive, made up a horrible excuse for why it took two weeks to get the second appraisal, and basically said, “I don’t really care what you think, I’ll schedule the closing for whenever I feel like it.â€

Well, it pissed us off, but given that we thought we’d close the following week, we didn’t want to do anything drastic, and let it be.

Once the second appraisal was completed, the broker sent the information to the Department of Transportation to have it processed so they could cut the buyers a check (the buyer’s are getting their down-payment from the DOT because of some weird eminent domain situation). A week passes, and the buyer still hadn’t received a check from the Department of Transportation. We call the broker to find out what’s going on, and he basically again says, “I don’t know, I don’t care, leave me alone and I’ll schedule the closing whenever I feel like it.†It appears he’s still pissed that we called him out on his mistake and is now just trying to piss us off.

Then, last Friday, the buyer’s receive their check from the DOT. They deposit the check, and we expected to hear from the broker this week that the closing is scheduled.

When we didn’t hear anything on Monday, we called the broker, only to have his answering service tell us that he’s out of town for the week. We leave a message for the guy in his office who is supposedly covering for him, but he doesn’t call us back. We drive to their office, but it’s just a store front, and nobody is there. We call the closing attorney, and he tells us that he is ready to close, but is just waiting for the broker to send him the loan package (he apparently talked to the broker a few days ago, but hasn’t heard from him since). The broker is apparently not answering the buyer’s agent calls either.

Given all this, it seem unlikely that we’ll close this deal by Friday, at which point our contract with the buyers expires and we need to extend the contract (or terminate it). It’s worth noting that the buyer is a military friend of the broker (that’s why he was chosen), but the buyer is really pissed as well, as they’re paying rent until they can close this thing. In fact, the buyers have asked us if they can move in prior to closing and pay us rent until close.

At this point, here are some things that I’m thinking about doing (and not doing):

* First and foremost, I’m not letting the buyers move in prior to closing, regardless of how much rent they pay. Our holding costs are about $250 a week on this property, but I’d rather keep spending that than take a chance on the buyers moving in and then not closing (and having to fix up the property again);

* Wait for the broker to get back into town and let him schedule the closing for whenever he gets around to it; in other words, don’t rock the boat and risk losing the deal;

* Demand that the buyers close with our lender instead. This will likely take about 2 weeks from today, which won’t make them happy, and they also won’t be happy having to deal with all the application work again. That said, our lender says it shouldn’t cost any extra money, assuming he can get the appraisals transferred from the current broker (unlikely in my opinion) and the buyers are a bit peeved at their broker right now. The down side to this is that it would cost an extra $500 in holding costs to wait the extra two weeks to close;

* Charge the buyers or their agent an extra $500-1000 to cover some of our extra holding costs. I’d hate to impose this on the buyers (it’s not their fault), but the agent is ultimately responsible for ensuring a smooth closing from their side, and that hasn’t happened. He’s currently getting a $700 bonus on top of his commission (we offered it as part of the deal), but I’m thinking he deserves a penalty for letting this get out of hand

* Do some combination of the above;

* Listen to suggestions from others…hint, hint… ;-)

Okay, any suggestions? And if I just wait it out and let the lender take his good ‘ole time, does anyone have any suggestions on how I can retaliate against this lender after the deal closes (I’m okay with anything really, really mean-spirited, as long as it’s not illegal)…

Thanks for any feedback or suggestions on how to deal with this VERY FRUSTRATING situation...

[Will Barnard]

I would have the broker reduce their fee, and even have the lender reduce some fees to get you more credit for their screw ups. Definately not the buyer's fault and you should keep them as happy as possible in this market.

Just another example of agents and lender brokers having poor business skills. Sounds quite familiar to me!!!

[J Scott]

Thanks for the feedback, Will...

But, how can I compel the lender to reduce any fees? He'll likely just be a jerk and say no...

The worst part is that I'm paying all closing costs, so in fact, I'm paying this idiot's commission...

[Will Barnard]

That is a good point. Not sure of your position or all the details, but perhaps you can "threaten to walk" and find a new lender in which he makes NO money, or he must pay for his screw up by reducing some fees.
Of course if you bluff, you must be prepared to have it called.

[Bill Hamilton]

I'm not sure how the the market is where you are but unless you are offering one H&^* of a good deal you should be careful. What I see is this is far and away a buyers market. Rock the boat too much and you could be looking for a new buyer. My bet is the buyers can find a new place in two days flat. You may not have the same amount of luck. And the broker is under no obligation to assign the appraisals over. I assume this is FHA based on the two appraisals deal and while your lender can force the issue with HUD it might take weeks just to get the appraisals.

[J Scott]

Hey Jim,

If it weren't for the lying and the borderline fraud by the broker (who stopped returning phone calls over a week ago), I likely would have given them another extension. But, it got out of hand, and every day we were waiting for this closing (and wondering if it would ever happen), was a day we were losing out on other potential buyers.

On a more positive note, I do believe this is a great deal. And, in fact, we cut the other buyers loose on Friday and put the house back on the market on Saturday.

On Sunday, we received a full-price offer on the house, which (if it closes) will result in a net profit of $37K, which is about $15K more than we were looking at with this idiot buyers the past two months.

So, hopefully it will all work out!

[Will Barnard]

Congrats J. Hope it works out that way for you. As I eluded to, sometimes it pays to fold your hand and start over, cutting your losses on one hand and winning the next pot!

Good luck and I hope that lender gets what is coming to him - Carma!