October 2008 saw the financial markets shaken to their very foundations. The fall out from this has been subtle in some cases and drastic in others. Many financial institutions tightened credit requirements for home buyers while others stopped offering certain financing options. Some of this has been much needed change and other changes leave me shaking my head asking "what are they thinking?"
Recently clients of mine had sold their condo through us and bought a new condo from a builder. It turned out their mortgage company had a policy that is beyond established contractual practice. We had a firm deal on their condo, but their lender told them they did not and alterations to the contract were necessary. This really upset my client, causing them to think I wasn't doing my job. I explained the situation to them and offered to discuss it with the broker.
When I spoke to their broker I indicated I could not make the changes she wanted to the completed contract, and that to do so would be tantamount to fraud. Her response was that she would talk to her legal department and her manager and get back to me.
When she called me back in less than 5 minutes, saying she had spoken to both (a virtual impossibility), I reviewed things with her some more and she indicated she would get back to me again. Days went by and she continued to feed a line of crap to my clients that the contract wasn't valid. I told them to talk to their lawyer, but later found out that their daughter is a paralegal and had already verified that my advice was correct. Their mortgage rep later told them that the lender was going to make an exception in their case. One thing I've learned over the years is banks don't make exceptions. They were passing off their policy as the law to their client, and instead of telling them that they created a huge fuss.
The moral of the story is that you need to be aware of what your lender really requires for you to get your financing, and if you are relying on your pre-approval as the basis of making your offer with no financing condition… Don't.
