It's a spooky market out there. What's debatable is how much of that can be blamed on lenders who are scared to give up money for mortgages, or whether the market misery is just an inevitable result of the global economic slump.
However, many real estate agents cite lenders as a top impediment to moving more homes off the market. Some of these stories are downright strange. Then again, it is that time of the year, and there are no shortage of ghost stories.
Lender: Please see how long you can keep this Hula-Hoop spinning around your waist. Yes, yes. We know it's on fire. Now please keep it going while we ask you some very important questions about this home loan you want.
Lender: So, we'll need details, including times, dates and doctors names, of all vaccinations given to your kids, dogs and your cat over the past decade. Can you provide those? And your grandfather's credit history, too? We don't need it for his entire life. Dating back to around the Vietnam War would do.
Buyer: Uh, OK. Can I stop now?
Lender: No, no, no. Don't stop yet. We've got a few more questions for you, and it's very important that you don't let the hoop hit the ground.
You will hear some tall tales if you ask homebuyers and their real estate agents for any nightmare scenarios they have. They have a few, and they aren't too shy to share.
To be fair, some of that may stem from growing tide of frustration with Wall Street and the financial world increasingly being expressed by the masses. It's hard to blame entirely either lenders or mortgage-seekers for a global meltdown that may be keeping homes from moving quicker.
Still, there are a few good stories about lenders requiring buyers and their agents to pull off the delicate balancing act of keeping a deal on the table while answering a great many questions from rightly cautious lenders.
Liz Claus, a well-known Orange County agent with Dilbeck Realtors, offered one of the more extreme examples of a lender's requirements one is likely to hear about.
She was representing buyers interested in a three-bedroom house in West Los Angeles selling for just under $1 million. The buyers had the income. The sellers had the motivation. However, the lender evidently wanted to make certain the buyers would continue to pay the mortgage—no matter how bad things could possibly get.
"I had a lender in the Los Angeles area ask a buyer to sign a statement that, in essence, said that if there was a nuclear holocaust they would continue to pay their mortgage," said Claus, who is also on the Dana Point Planning Commission. "Of course they signed it because they wanted the house, and since they would probably be dead if there was a nuclear holocaust, they felt comfortable they would not have to make the payments. We had no idea why that was required. I have never seen that clause since."
Last year, more than 2 million people were turned down for homes, according to the California Association of Realtors, which also states that these rejections were often because the applicants didn't meet certain lender requirements or because their applications were incomplete or otherwise problematic.
Few would argue lenders' underwriting criteria have become more rigorous in recent years.
Matt Clements, with Prudential in Laguna Niguel, who also sits on the board of directors for Orange County Association of Realtors, has heard the stories from his fellow OCAR members and has witnessed first-hand how chilly things can sometimes become between real estate agents and mortgage brokers.
Normal conditions on a mortgage primarily concern health and safety — a staircase with a broken rail discovered during an inspection that must be fixed, a crack found in a sidewalk needs mending repair.
What agents like Clements are reporting lately go well beyond staircases and sidewalks.
"I've seen some pretty ridiculous conditions," he said.
Marina Hills, a massive planned community in Laguna Niguel, is the locale for one of Clements' more down-to-Earth, but ultimately more frustrating, anecdotes about today's tough lender requirements.
The lender was asking for 19 different conditions before a loan was approved. One of those requirements was that paperwork be provided for proof of repairs on a wall in the same Marina Hills neighborhood, but in a different tract, on a different home, and those alleged repairs involved not the buyer, nor the seller nor the agent.
The issue evidently popped up on a report for a list of required repairs the lender had run on the 1,500-plus single-family home neighborhood.
"They just never got the paperwork back, and the report just came up with a condition, on a totally different tract, on a totally different home," he said.
The repair issue had sprung up so long ago, that paperwork was seemingly lost, though eventually tracked down, Clements said, adding, "We ended up changing lenders and closing the deal 12 days later."
It wasn't so much the one "far-fetched requirement," but all of them together that made the process difficult, he said.
"When it came down to satisfying 19 conditions, we couldn't get them all," Clements said. "The challenge today is the amount of conditions, and they are conditions that appear to be, at best, arms-length from the transaction. It's been a trend."
Got an interesting real estate story to tell? Email email@example.com.