About Oakland's Estuary

Two buyers were vying for the same waterfront property that is being sold as a short sale.

• Buyer 1, an investor, offered cash, but the proceeds would be less than what the lender needs to approve the sale.
• Buyer 2 offered slightly more, was putting down 50%, was preapproved. He was following up almost daily regarding when the lender would accept his offer. He kept trying to amend his first offer, then giving deadlines for a response or he would rescind.

Finally, we accepted the Buyer 2's offer only because it was higher than the first, and this offer would meet the lender's requirement.

We're in contract less than one week. Then BOOM! The Buyer 2's lender, who preapproved him in the first place especially since he was planning to put 50% down, rejected the loan. The lender said:

"I am very sorry to inform that the loan for Mr. M.C. has been declined. The reason was his income to debt ratio is too high to qualify for this loan. He was pre-approved with the understanding that his rental income from the current property will be used. This is no longer the case as we cannot use his rental income to qualify for the loan because there is no equity left in his rental property AND the subject property he is buying is a CONDO. I am sorry for the inconveniences."

Buyer 2 owns another condo that he was going to rent out. But since he bought it, there were so many foreclosures and short sales in his complex that the market value of this property was adversely affected, to almost $200K less than what he paid for it.

What did the lender know, and when did she know about it?

But what dismays me about this is that the buyer's lender should have already determined all these before preapproving him to buy the waterfront condo! It's shocking that even with 50% downpayment, he couldn't get his loan. And he seems to be encountering he same problem after speaking with a second lender. So he got cold feet, and is backing out.

So now, I'm scrambling to get the first buyer to submit a new and higher offer --- just enough to meet the lender's minimum requirements.

Aaaarrrgggh!