Back from the Desert…

Rock and a Hard Place

My Realtor friends, I’m afraid you will have to tear up your month-at-a-glance planners. You know those ones that only allow you to offer 30 day transactions in this competitive market. The CFPB has a view of what they think the timing of the home buying process should look like.

http://files.consumerfinance.gov/f/201409_cfpb_tila-respa-integration-disclosure-timeline-example.pdf

And I’m afraid that the Feds strongly believe that 30 days is not an option and is irresponsible on our part to encourage. It looks like 60-90 days is their target, with lots of points where the borrower has reflective time to review and hit the stop button. I know that you will say that you only rush closings because the borrowers are eager to get in the home. Well, these buyers are telling you one thing before and the Feds something else after. Home buyers are repeatedly saying post-closing that they feel rushed and pressured in the process. They don’t feel they had enough time to fully inspect and compare the property, and they also feel rushed during the finance process without enough times to review and make good decisions.

So we are bad people for doing for the buyer what we believe they want us to do.

The Feds believe that we are the professionals, and we should know better. Just getting someone into a house right away because they are gleeful kids under Christmas Eve, isn’t what they believe we should be doing. They believe we have a fiduciary responsibility to warn and prepare them for all the things that can go wrong and the long term ramifications of their decisions.  To do this may mean that some potential buyers lose out on homes to a cash buyer who won’t be hamstrung by these rules; but is that really that different than today where a smart seller and broker know that a true cash offer trumps any other offer for speed and certainty?

The painful part to this process is that this information just slowly leaks out amongst the real estate community, so not everyone is on the same page leading to awkward expectations.  There are some things that can be done now to begin to mitigate the pain.

First, take control of the buyer. Do not show them any homes without having a true preapproval done by your most trusted lenders. A preapproval must include a full application, credit report and full documentation of income and assets. Given security and safety issues today why wouldn’t you have your buyer fully vetted? We check public records when we do credit too!

Second, when you refer us please tell them to tell us everything, no secrets (we will find out!), and do everything we tell you. In the new CFPB model; paperwork, signatures, returned disclosures are more likely to stop a closing than an actual approval due to income. Tell them yes it’s brutal and bizarre at times but follow the lead of your lender and respond immediately and the process can go smoothly and more quickly.

Lastly do not continue to push the much less than 30 day contracts in this new world. If you put a lender in the position of responding to “can you close this deal in three weeks?” they will say yes, because if something has a 15% chance of happening it CAN be done.  They know that if you hear no, you will likely push to find someone who will say yes or the listing Realtor will. The fact is that many deals will still go through fine in these short windows, but the risk of blow-up with rescue taken out of lenders hands by the regulations is too high a risk if multiple closings are dominoes.  Of course if you can have the closings all not by on the 30th of the month, then it will also decrease the likelihood of human error.

So please review the link attached and imagine the affect that will have on the process of buying a home and how we will all adapt. There will be a hard start of new time frames for next August with required HUDs three days prior to closing - no time like the present to start.

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