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Bill Travis, Broker/Owner

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To Pre-Qualify or Not to Pre-Qualify

03-21-10
Bill Travis, Broker/Owner

Recently a buyers agent in Gilbert AZ brought an offer for my listing. Included with the offer was the Loan Status Report, which stated that the mortgage broker had received the application and reviewed the documents; and that the buyer was pre-qualified for the loan. It did not say pre-approved, but we're not going there anyway.

The offer was for full price and their agent stated that the buyer had a good job and was well qualified. It was a clean contract and my Gilbert seller accepted the offer. The lender had promised that he could close in 3 weeks. The deadline to accept was set at 3:00 pm. We planned to wait until the last minute to send the acceptance in, just in case a stronger offer were to come in because we knew we had some very interested parties.

At 1:00 I received a call from a buyers agent who said he was meeting his client after work at 6:00 pm to write an offer and I should have it by 8 pm. My seller was happy with a clean full price offer and there was nothing to counter, therefore, we felt it prudent to meet the deadline and not play any delaying games. So I informed the agent that unless he could get the offer to us by 2 pm we were accepting an offer at 3 pm, and would take his offer as a back up. They didn't submit the back up offer.

Six days into the escrow the buyers agent called and said the loan was falling through. The lender was turning the loan down because the buyers job was a 4 hour drive away, and that was too far away from a primary residence. Needless to say I was very upset with the mortgage broker and telephoned him to let him know that he signed a document stating that the buyer was pre-qualified, when in fact he was not.

His response was: "The buyer expected to have a job transfer approved by now, but it didn't happen, and isn't it better to have it cancelled 6 days into the escrow rather than 20 days?"  I said no, we should have been notified that the pre-qualification was based on the job contingency in the LSR.

Because the LSR did not disclose the job transfer contingency we lost a second buyer who wanted to submit an offer later in the same day that we accepted this offer. And I felt it unreasonable that a mortgage broker would sign his name to an LSR pre-qualifying a buyer stating that he had reviewed the documents, knowing that the buyer was commuting 4 hours to work. That commute distance (8-hours round trip) obviously requires a person to have a temporary residence for a few days at the work location and you knew that your lender would not finance a primary residence that distance from work.

He said the buyer just today received word that the transfer did not go through, and he contacted everyone immediately. I told him that what he actually had was a buyer that was pre-qualified contingent upon the job transfer, and that he withheld that information from my seller and caused him to lose another buyer who wanted to make an offer. Consequently, by not disclosing to us that this was a "contingent pre-qualification" he may have caused financial damage to my seller and if that turns out to be the case, then he may come after you to recover his damages.

At this point the broker decided to apologize. He said he agreed that he "may" have jumped the gun by assuming that the job transfer would go through and didn't mention the contingency on the LSR.

The buyer asked us to wait for two days for him to try that transfer again. Fortunately for everyone he got the transfer approved and everyone was happy.

I have to give the mortgage broker credit for good communication. As soon as the contract was signed, he made contact with me and said that he would keep everyone up to date. And he certainly did that. He made an error in judgment on the LSR and when confronted with it he admitted it and apologized. I appreciate that in a person.
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