Real estate conundrum - what's the best faith action here?
May 30, 2018 10:50 AM Subscribe
I wrote a question a while back about buying a house, and everything worked out, and we are under contract, with a closing date of this Friday (two days from now). Now everything is falling apart. It's not our fault, but we feel like maybe we should compensate the sellers?
Long, long story that I don't want to give minute details of but basically - we are using a city program that offers down payment assistance. Our lender has handled all of the details of this program, because that is what the city requires. We initially signed the application for this program on May 1 and last week (8 business days ago) were asked for a few additional pieces of paperwork, which we provided. Our closing date of June 1 has been known to the city and our lender all along.
Today, two days before closing, we were asked, by the city through our lender, for some other paperwork (which we had not been asked for before - it's not like we failed to give them something they asked for earlier) and informed that once they approve the down payment assistance loan, it will take TEN DAYS to get everything squared away so we can close. As in, there is no way we are closing in two days. This is the first time we were informed of the length of this process, and our lender also did not know this. Until an hour ago, both we and the lender were moving forward with closing date in two days.
Ok, not a huge deal... except that our sellers asked a few weeks ago to delay closing so they had more time to find a place to live and we said no because we had a rate locked in only until closing. Our closing date was not initially in the contract, so we negotiated a deal (that both sides were very satisfied with) that involved us paying to fix some small issues found on inspection in exchange for them agreeing to the closing date we wanted and leaving us some furniture we wanted. They spent a lot of money on a short term rental so they could be out by closing. When we negotiated this, we signed an updated contract that does include June 1 as closing date, but does not name a penalty if either side can't close.
We have upheld all of our contractual obligations in terms of providing documents to the lender, making good faith effort to follow up on financing, etc.
Basically, we feel badly that our sellers initially asked to delay closing, we said no, now we are the ones (through financing delays) delaying closing, and they could stay in the property for 2 more weeks but have instead already secured expensive rental housing. Should we, as a show of good faith, offer to compensate them in some way when we inform them of the delay? If so, how - pay the mortgage for the delay, pay some or all of their short term housing costs, just offer some arbitrary amount of money? I know we could just tell them and see if they ask for compensation, but we'd really like to be good people.
(There are no real estate agents involved, our attorney just points to our contract and has no advice on what's basically a moral issue, our lender is unapologetic and blames the city, and we are not eager to spend money but also want to treat our sellers right. There are no other closings contingent on this on either side.)
Long, long story that I don't want to give minute details of but basically - we are using a city program that offers down payment assistance. Our lender has handled all of the details of this program, because that is what the city requires. We initially signed the application for this program on May 1 and last week (8 business days ago) were asked for a few additional pieces of paperwork, which we provided. Our closing date of June 1 has been known to the city and our lender all along.
Today, two days before closing, we were asked, by the city through our lender, for some other paperwork (which we had not been asked for before - it's not like we failed to give them something they asked for earlier) and informed that once they approve the down payment assistance loan, it will take TEN DAYS to get everything squared away so we can close. As in, there is no way we are closing in two days. This is the first time we were informed of the length of this process, and our lender also did not know this. Until an hour ago, both we and the lender were moving forward with closing date in two days.
Ok, not a huge deal... except that our sellers asked a few weeks ago to delay closing so they had more time to find a place to live and we said no because we had a rate locked in only until closing. Our closing date was not initially in the contract, so we negotiated a deal (that both sides were very satisfied with) that involved us paying to fix some small issues found on inspection in exchange for them agreeing to the closing date we wanted and leaving us some furniture we wanted. They spent a lot of money on a short term rental so they could be out by closing. When we negotiated this, we signed an updated contract that does include June 1 as closing date, but does not name a penalty if either side can't close.
We have upheld all of our contractual obligations in terms of providing documents to the lender, making good faith effort to follow up on financing, etc.
Basically, we feel badly that our sellers initially asked to delay closing, we said no, now we are the ones (through financing delays) delaying closing, and they could stay in the property for 2 more weeks but have instead already secured expensive rental housing. Should we, as a show of good faith, offer to compensate them in some way when we inform them of the delay? If so, how - pay the mortgage for the delay, pay some or all of their short term housing costs, just offer some arbitrary amount of money? I know we could just tell them and see if they ask for compensation, but we'd really like to be good people.
(There are no real estate agents involved, our attorney just points to our contract and has no advice on what's basically a moral issue, our lender is unapologetic and blames the city, and we are not eager to spend money but also want to treat our sellers right. There are no other closings contingent on this on either side.)
One thing I've learned in many many years of customer service is that you have a surprising degree of control over how seriously the other party will take bad news based on how you introduce the information. When you're too apologetic, it flags the situation as "a big deal" and can actually trigger a bigger emotional response than if you treat something matter-of-factly as a "unfortunate but unavoidable". Of course, this is a fine line to walk, as you don't want to be perceived as dismissive or unsympathetic, but there's a surprising amount of leeway here.
Part of it is familiarity with the process and [percieved] information asymmetry. Most likely, the seller has not sold a lot of houses and is looking to the other parties involved to model appropriate behavior. If you act like you know what you're doing, they'll probably mostly go along with what you say. If you say "Boy howdy, this sucks for everyone involved including us" (which is true), "real estate transactions are big and complicated and almost always get delayed or derailed by unforseen nonsense" (also true), you can probably get away with a shrug and not offering them anything.
I know that's not what you're asking, but my point is that there will be a paradoxical effect where within a certain range, the more you offer them in compensation for the inconvenience, the higher you are "appraising" the inconvenience at, and the more you are implying that it is your responsibility to compensate them for it. So offering them nothing at all might feel too cruel, but I'm suggesting offering them a token which semantically admits no fault but expresses empathy for *their* misfortune rather than attempting to actually make it right, which will just make them more upset, potentially make them see you as lowballing, then they start itemizing their costs and expect you to pay for all of them.
The amount of information you give and the tone you strike in this Ask feels right to me.
"Here's what happened, it's a bummer, can we [give you theater tickets|get you a brand-new refrigerator for your new place|some other courtesy that isn't represented as a monetary recompense for quantifiable costs]"
posted by Krawczak at 11:19 AM on May 30, 2018 [9 favorites]
Part of it is familiarity with the process and [percieved] information asymmetry. Most likely, the seller has not sold a lot of houses and is looking to the other parties involved to model appropriate behavior. If you act like you know what you're doing, they'll probably mostly go along with what you say. If you say "Boy howdy, this sucks for everyone involved including us" (which is true), "real estate transactions are big and complicated and almost always get delayed or derailed by unforseen nonsense" (also true), you can probably get away with a shrug and not offering them anything.
I know that's not what you're asking, but my point is that there will be a paradoxical effect where within a certain range, the more you offer them in compensation for the inconvenience, the higher you are "appraising" the inconvenience at, and the more you are implying that it is your responsibility to compensate them for it. So offering them nothing at all might feel too cruel, but I'm suggesting offering them a token which semantically admits no fault but expresses empathy for *their* misfortune rather than attempting to actually make it right, which will just make them more upset, potentially make them see you as lowballing, then they start itemizing their costs and expect you to pay for all of them.
The amount of information you give and the tone you strike in this Ask feels right to me.
"Here's what happened, it's a bummer, can we [give you theater tickets|get you a brand-new refrigerator for your new place|some other courtesy that isn't represented as a monetary recompense for quantifiable costs]"
posted by Krawczak at 11:19 AM on May 30, 2018 [9 favorites]
Is there any way that your lender will give you a bridge loan for the down payment that in theory is coming from the city? Obviously this is a risk to you because of the city doesn't give the assistance you'll still be on hook for the bridge loan. Seriously engage your lender (bring up that they should have known / advised about timelines) about what they can do to assist you with keeping the closing date.
Also, even though the other side will be annoyed/angry about the 10 days after closing after you previously wouldn't extend it to them, when given the choice of "go forward with the deal after 10 more days" or "start the process of finding a buyer from scratch" it's really likely that they'll go forward with the 10 more days with the possible exception that not selling this house causes a house they might be under contract for to fall through with no way they can remedy this.
As this is the fault of the city and partially the lender I don't think you should come forward with an offer of anything additional for the inconvenience. You already took on some repairs that you otherwise wouldn't have for your previous not wanting to adjust the closing date.
If they seem like they're angry and ready to let the deal fall through, I'd offer 1/2 of their cost of short term rental (assuming short term rental is not more than a month).
posted by nobeagle at 11:19 AM on May 30, 2018 [3 favorites]
Also, even though the other side will be annoyed/angry about the 10 days after closing after you previously wouldn't extend it to them, when given the choice of "go forward with the deal after 10 more days" or "start the process of finding a buyer from scratch" it's really likely that they'll go forward with the 10 more days with the possible exception that not selling this house causes a house they might be under contract for to fall through with no way they can remedy this.
As this is the fault of the city and partially the lender I don't think you should come forward with an offer of anything additional for the inconvenience. You already took on some repairs that you otherwise wouldn't have for your previous not wanting to adjust the closing date.
If they seem like they're angry and ready to let the deal fall through, I'd offer 1/2 of their cost of short term rental (assuming short term rental is not more than a month).
posted by nobeagle at 11:19 AM on May 30, 2018 [3 favorites]
I'm not understanding why you're not placing the burden on the lender, who should have informed you of the paperwork needed (and processing time).
posted by artdrectr at 6:13 PM on May 30, 2018 [3 favorites]
posted by artdrectr at 6:13 PM on May 30, 2018 [3 favorites]
Delays in closings truly aren't a big deal, I wouldn't offer them anything up front, just have your buyers agent call their agent and tell them the date was pushed back by the lending company, you're not in charge of their feelings and honestly it shouldn't be any surprise that there's at least one delay.
Edited: I see that you don't have an agent upon rereading so I just calmly call them and say hey the date got pushed back there's nothing we can do about it.
posted by julie_of_the_jungle at 6:24 AM on May 31, 2018
Edited: I see that you don't have an agent upon rereading so I just calmly call them and say hey the date got pushed back there's nothing we can do about it.
posted by julie_of_the_jungle at 6:24 AM on May 31, 2018
Response by poster: Thanks for the advice. The "be apologetic but not too much" is what we will go with.
I also appreciate the suggestion of asking for a bridge loan. That was unfortunately a no-go for reasons I don't quite understand. Too late in the process, apparently.
As far as placing the burden on the lender, we aren't really sure how to do that. It's not like we are in a good position to just walk away now, so we don't have much leverage. We have expressed our dissatisfaction and frustration and they just kind of shrugged and said they don't do many loans through this program (and neither does any other lender.. It's a small program) and they had no way of knowing the timeline. That's obviously a lame excuse, but we don't know how else to push them. They've promised to ask the city to expedite the process as much as possible but aren't very sorry beyond that.
posted by raspberrE at 2:12 PM on May 31, 2018
I also appreciate the suggestion of asking for a bridge loan. That was unfortunately a no-go for reasons I don't quite understand. Too late in the process, apparently.
As far as placing the burden on the lender, we aren't really sure how to do that. It's not like we are in a good position to just walk away now, so we don't have much leverage. We have expressed our dissatisfaction and frustration and they just kind of shrugged and said they don't do many loans through this program (and neither does any other lender.. It's a small program) and they had no way of knowing the timeline. That's obviously a lame excuse, but we don't know how else to push them. They've promised to ask the city to expedite the process as much as possible but aren't very sorry beyond that.
posted by raspberrE at 2:12 PM on May 31, 2018
This thread is closed to new comments.
But to show good faith, the most important thing is to keep them informed of exactly what's going on, I think. If this extra delay is just a tedious admin thing but the whole transaction is still going through, they'll be relieved to hear about that. Once you've spoken honestly to them, any compensation should come naturally out of that conversation. You've all come to sensible arrangements about other stuff already, this should be no different.
It's a stressful time for all parties. Good luck!
posted by rd45 at 11:13 AM on May 30, 2018 [3 favorites]