Once upon a time, if you could fog a mirror a lender would give you a pre-approval letter. Heck they'd probably even give you an approval letter. Now that letter wasn't worth the paper it was written on. But that didn't stop anyone.

No one is a fan of the real estate collapse, certainly not me. But I was very glad to see the end of worthless lender letters.

But...they're back! I've experienced this first hand myself and also started to hear the stories again from other agents.

So, if you're a buyer, be careful who you're doing business with! A lender who leaves you standing at the altar within a few days of closing can cost you serious money or even lose you the house you're trying to buy!

Call me if you want some help with a list of good, local lenders. (I have a strong preference for local so I can hunt them down if something goes wrong!)

As part of the contract on a home, there's a section of the offer where the buyer indicates whether their lender will provide a letter, after a certain number of days, certifying that the buyer is now fully qualified for a mortgage. The contract is very specific about this letter and what it needs to say. There are six mandatory items:

1. Purchaser is approved for the Specified Financing.

2. A Ratified Contract has been received.

3. A written application for the financing has been made.

4. Income, asset and liability documentation on Purchaser have been received.

5. Purchaser's credit has been reviewed, and

6. The application has been reviewed and meets underwriter and investor guidelines.

The buyer and seller negotiate how many days will be allowed for this letter to be received. 14 days is a number I see fairly often so we'll use that for our discussion here.

If, at the end of that 14 days, the letter is produced, and, if, subsequently, the lender does not honor the lender and does not fund the loan, the buyer is considered in default and may be at risk for losing their earnest money deposit. This is a good reason for choosing your lender carefully!

What I continue to see is this section of the contract completed indicating the letter will arrive in 14 days. And, the 14th day comes and goes with no letter.

The seller's options at that point are to continue to wait and hope they get a letter, or to void the contract. Let's face it, the chances of any seller voluntarily voiding a contract in this market are slim and none!

So, essentially, this is another toothless provision. And, the entity responsible for producing this letter in a timely fashion, suffers absolutely no consequences for failing to do so. The lender won't lose any earnest money. There's no penalty to them for failing to deliver on the promise that's been made on their behalf. Fair enough, since they didn't sign off on this. But then, why bother putting it in the contract.

This is a contract that was written for a hot seller's market. Provisions like this are essentially useless right now. And, agents need to be carefully explaining that to the sellers to make sure their expectations are realistic.

The truth with this, and any contract, is that the language is only binding to the extent that there's sufficient leverage to enforce it. This is a waste of paper and ink!

We're average! I'm not sure if that's good news or not. But given that housing indicators here are uglier than the national average in many ways, this could be a good thing.

Nationwide 10% of all ratified contracts are falling apart due to the inability of the purchaser to get financing. And, locally, we're seeing the exact same number of ratifed contracts fail.

I can't tell you that each and everyone of the contracts here fell apart over financing issues. But I can tell you that 99% of the time, that's the case.

This means, if you're a seller, the first thing your real estate agent should look at in an offer is the lender letter. Is the lender reputable? If it's someone they've never heard of there are several possible strategies to pursue. But the first thing to know is to be very careful!

And every seller should be aware that no house is ever really sold until the ink is dry on the paperwork the day of settlement. If you're buying another property, make sure that you've indicated coinciding settlements meaning your new purchase can't happen until the settlement on the house you're selling.

If you're a buyer you should know that the latest version of the contract is much more favorable to the seller if your lender backs out of a loan commitment. Choose your lender very carefully to avoid heartaches and headaches down the road!