Loans Answers

Forclosure/Counter Offer Question

Question: Is it normal for a forclosure company to specify clauses such as a “$100/Diem” clause? The counter offer is 64K, pending financing and the $100/day clause if it doesn’t close by January 26, 2004. They lay it out pretty good in the addendum, but seems to me if any thing goes wrong, whether it’s on their end or not I could possibly be out of luck since they are a corporation and I with really no money to spare for legal battles. Plus, $100/day could really hurt.

That clause reads as follows: “Buyer agrees to the $100/day per diem if not closed by 1/26/04 through date of closing provided the delay is not caused by the seller.”

Is this type of clause normal with foreclosure property?

The only other thing I worry about is closing by 1/26/04. They specify the appraisal of the property must be completed in 19 days and loan approval in 21 days. Is it possible to get a bank to move that fast? Is that fast? The bank says they can do it, but everyone is in it for their own cut, not my best interest. I appreciate any thoughts or opinions realizing this is not a substitute for an attorney. I would just like experiences or opinions on the closing date being feasible and if that clause is normal.

Answer: Yes, it’s SOMEtimes possible to get a bank to move that fast, but it depends on an awful lot of factors, only part of them having to do with you (i.e. how readily accessible is the documentation they’re going to want from you, how clean is your credit report, how straightforward and “ordinary” is your financial situation). Some of them have more to do with the bank (is your loan officer blowing smoke about their turnaround time — which is VERY common, not to say almost typical), is the loan processor too swamped to pay close attention to one individual transaction to keep it on the fast track, is the appraiser they select able to comply with the turnaround time demanded, will they get the loan documents to the escrow or title company [if you're in an escrow state] or attorney at *least* a couple of business days BEFORE the scheduled closing date to give them time to do *their* prep work, overnight documents to the seller to sign *and* get them back in time to record…), some of them having to do with the property (is it going to need additional inspections, above and beyond the appraisal, to satisfy lender? If it does, how long will those take? What if it needs work done to pass reinspection? What if there are clouds on the title that weren’t cleared by the foreclosure?)

And as you seem to realize, the likeliest player to blow the time frame is the lender.

I’ve never seen this done, and have NO idea what your likelihood of success might be in floating the idea… but if I were in your shoes, and the loan officer was swearing to me that s/he could make that deadline, I’d ask for a written agreement specifying that, so long as you provide all requested documentation to the lender within 10 business hours of it being requested from you, the lender will eat the $100/day late closing fee if it comes to that. (Which, in practice, means that the loan officer would eat it out of his/her commission, of course.) Of course this gets a bit more complex because the question could arise as to whether a *fast* loan with, say, above-market interest rate or loan fees, would get them off the hook. If you decide to try going this route, talk with an attorney about feasibility.

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