Tuesday, February 28, 2012
Don't let your pending divorce de-rail your home purchase!
So this morning I closed another short sale...the unique thing about this particular transaction was that the original closing date that was approved by the short sale lender (HSBC) was January 20, 2012. Well, today is February 28, 2012...a mere 5 weeks later!!
So among some other tabloid-worthy circumstances that made this short sale a nightmare (let's just say one of the sellers -- the wife -- fled the country mid-transaction...but literally thanks to some PI work THAT didn't hold up our closing), the most significant issue that lead to the buyer's late closing was that just a few days prior to our scheduled closing date, his divorce became final.
Now why would that matter, you may ask yourself?? The implications of the finalization of the buyer's divorce -- part of his divorce settlement included having to pay monthly spousal support (aka, alimony). That spousal support then had to be factored into his overall debt-to-income ratio to qualify for his loan, and this addition to his monthly debt suddenly elevated him to a level that made him UNABLE to qualify for his 5% down conventional loan just days before closing...so the lender had to switch the loan to another type of loan that would accommodate a slightly higher debt-to-income ratio (from conventional to FHA), requiring a whole new appraisal and new underwriting of the loan. UGH.
FHA lending standards are a bit different than conventional lending standards, and since the home was a bit of a fixer, the underwriter required that some repairs be made to the house that were not required before. At the end of the transaction, I ended up obtaining (more like begging for) FIVE separate one-week extensions to the closing date for this short sale. The short sale negotiator must have been tired of hearing from me!!!
Luckily in the end, we were able to close the transaction -- and buyer and seller are both elated. And I am sure that the HSBC short sale negotiator is elated to be done with me too! Ahh...