Financial Facts: How to avoid a contract faux pax |

Financial Facts: How to avoid a contract faux pax

Bob Kieber
Special to the Daily

For each and every sale and purchase of a piece of real estate there has to be a written contract. Gone are the days where a handshake and a short written note on a cocktail napkin are acceptable. Now we have very detailed contracts that have been written to hopefully protect both the buyer and seller and to detail what is expected by both parties.

Today’s contracts require signatures of the sellers and the buyers and also the real estate agents involved in the deal. There are specific dates that have been set for the buyer to meet and in many cases require the involvement of a mortgage professional like myself. Unfortunately in some cases the dates set forth in the contract are not possible as the borrower may have some credit problems or just a couple of errors on the credit report that will take a few days to clear up.

There are times when additional conditions that a buyer or seller may want to place in the contract that may actually cause a problem for a lender.

As an example, many condos and homes are sold furnished. There are beds and sofas and nick-knacks hanging on the walls. The seller has decided to not take those items with them and it saves the buyer some time and money by not hauling those items back to their primary home. In the contract it is noted that the furniture and other items are sold with the property. This can be a challenge as mortgage investors do not want to lend money on a sofa, bed or nick-knack. If you are buying or selling a furnished home you may want to consider selling those items on a separate bill of sale outside of the real estate contract.

There are also contracts that state that the seller will agree to the reservations already in place for that particular home. This may cause a problem if the buyer is buying the home as a second home. Most investors do not prefer to see that the home is being rented but being purchased as a second home. Keep in mind that interest rates for second homes are generally less than interest rates for a property being purchased as an investment property.

Lastly, is what I consider the biggest challenge is the lack of time for the mortgage professional to get the mortgage documents together for the underwriter. Get your mortgage professional involved early on and get them involved even prior to looking for that new home and you may find that the process can and generally will go much easier than if you wait until the last minute.

For answers to your mortgage related questions call Bob Kieber at (970) 453-4700 or email him at Bob is a local mortgage lender with Millennium Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.

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