Fun with the ‘Family Friend’ Lender

This is a story that starts with a Buyer using a family friend to originate their FHA loan, and ends with complete chaos, including a potential $900 fine and me rescuing an appraiser with my special water main valve opening tool.  And no close of escrow - yet.

Let’s start with the Seller being a bank - this is a lender-owned home, it has been foreclosed.  This means my Buyer must sign 11 pages of contract amendments, sign away some rights, various things.  The upside is that he’s buying a house for $20k less than the appraisal.

Being a lender-owned home, it also means that any documentation that must be signed by the Seller will take days, if not weeks, to get signed. 

The family friend, whom my Buyer chose to use, hasn’t originated an FHA loan in a very long time.  He neglects sending out the FHA real estate certification form to be signed by all parties until the day after we are scheduled to close.

This form, of course, must be signed by the Seller - so let’s hope to get that form back by the end of next week.

Remember those 11 pages of amendments?  There’s a $100/day penalty for not closing on time.  And we can’t close without the Seller’s signature on that certification form.  Hello, $900 penalty for my Buyer. 

Pleading on my Buyer’s behalf with the Seller, we have a good chance of getting the fee waived, as we are starting to convince them that the delay is not directly my Buyer’s fault.  No guarantee there yet.

Here’s the lesson - don’t use a family friend in such an important thing as buying a house just because they are a family friend. 

Oh, and the appraiser?  The lender/family friend’s choice?  Was told twice he would have to turn the water on at the street in order to perform the appraisal, and didn’t take any tool out there to help him accomplish that.  And so walked away from the appraisal without completing it.  And now the water service has been canceled as inspections are over.  And he still needs to check the water inside the house.

Luckily, there’s one person involved in this mess that knows how to turn on a water main.  I’ll be running out there with my tool Monday to get this thing done with.

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Equal Housing Opportunity Realtor
Applied Real Estate Technology