I was supposed to have a settlement yesterday. My clients are buying a foreclosure. (The one that we've been working on for months and months and months!)

I know it will come as no surprise to many of you that the settlement didn't happen.

Why, you ask......?

The original estimated settlement statement (HUD1) differed from the final numbers by.....TEN CENTS.

Ordinarily, the change would be made and we'd have approval from all parties for the change in a matter of minutes and would proceed with settlement.

But, this ten cent change had to go back up the chain of command on the bank's side. And, so, we're still waiting. Since this was Friday and no bank is going to give us final approval over the weekend settlement won't happen before Monday.

Except that this week, Monday is a holiday. So, now we're looking at Tuesday at the earliest.

So, how much do you think it cost the bank, to approve this ten cent change? How much in lost time (wages) for the employees who worked on this? How much did it cost them to have this money in my clients' pockets and not theirs for these extra few days?

This is the culmination of months of negotiations as the bank continued to get lower offers from my clients after they rejected higher ones. And, in one case, lowered the price while we had a higher offer on the table!

There are very well managed financial institutions in this country. This isn't one of them.

1. Does not tell the truth on the loan application
2. Submits incorrect information to the lender
3. Has recent late payments on credit report
4. Found out about additional debt after loan application
5. Borrower loses job
6. Co-borrower loses job
7. Income verification lower than what was stated on loan application
8. Overtime income not allowed by underwriter for qualifying.
9. Applicant makes large purchases on credit before closing
10. Illness, injury, divorce or other financial setback during escrow
11. Lacks motivation
12. Gift donor changes mind
13. Cannot locate divorce decree.
14. Cannot locate petition or discharge of bankruptcy.
15. Cannot locate tax returns.
16. Cannot locate bank statements.
17. Difficulty in obtaining verification of rent.
18. Interest rate increases and borrower no longer qualifies.
19. Loan program changes with higher rates, points and fees.
20. Child support not disclosed on application.
21. Borrower is a foreign national.
22. Bankruptcy within the last 2 years.
23. Mortgage payment is double the previous housing payment.
24. Borrower/co-borrower does not have steady 2-year employment history.
25. Borrower brings in handwritten pay stubs.
26. Borrower switches to job requiring probation period just before closing.
27. Borrower switches to job from salary to 100% commission income.
28. Borrower/co-borrower/seller dies.
29. Family members or friends do not like the home buyer chooses.
30. Buyer is too picky about property in price range they can afford.
31. Buyer feels the house is misrepresented.
32. Veterans DD214 form not available.
33. Buyer has spent money needed for down payment and closing costs and comes up short at closing.
34. Buyer does not properly "paper trail" additional money that comes from gifts, loans, etc.
35. Does not bring cashier´s check to title company for closing costs and down payment.

36. Loses motivation to sell (job transfer does not go through, reconciles marriage, etc.)
37. Cannot find a suitable replacement property.
38. Will not allow appraiser inside home.
39. Will not allow inspectors inside home in a timely manner.
40. Removes property from the premises the buyer believed was included.
41. Is unable to clear up liens against their property ? short on cash to close.
42. Did not own 100% of property as previously disclosed.
43. Thought getting partners signatures were "no problem" but they were.
44. Leaves town without giving anyone Power of Attorney.
45. Delays the projected move-out date.
46. Did not complete the repairs agreed to in contract.
47. Seller´s home goes into foreclosure during escrow.
48. Misrepresents information about home & neighborhood to the buyer.
49. Does not disclose all hidden or unknown defects and they are subsequently discovered.
50. Builder miscalculates completion date of new home.
51. Builder has too many cost overruns.
52. Final inspection on new home does not pass.
53. Seller does not appear for closing and won´t sign papers.

54. Have no client control over sellers.
55. Delays access to property for inspections and appraisals.
56. Unfamiliar with their client´s financial position ? do they have enough equity to sell, etc.
57. Does not get completed paperwork to the lender on time.
58. Inexperienced in this type of property transaction.
59. Takes unexpected time off during transaction and can´t be reached.
60. Jerks around other parties to the transaction ? has a huge ego.
61. Does not do sufficient homework on their clients or the property and wastes everyone´s time.

62. Engineer will not approve septic system or well.
63. Inspection report reveals substantial damage and seller is not willing to fix or repair.
64. Home was misrepresented as to size and condition.
65. Home is destroyed prior to closing.
66. Home not structurally sound.
67. Home is uninsurable for homeowners insurance.
68. Property incorrectly zoned.
69. Portion of home sits on neighbor´s property.
70. Unique home and comparable properties for appraisal difficult to find.

71. Fails to notify lender/agents of unsigned or unreturned documents.
72. Fails to obtain information from beneficiaries, lien holders, insurance companies, or lenders in a timely manner.
73. Lets principals leave town without getting all necessary signatures.
74. Loses or incorrectly prepares paperwork.
75. Does not pass on valuable information quickly enough.
76. Does not coordinate well, so that many items can be done simultaneously.
77. Does not bend the rules on small problems.
78. Does not find liens or any title problems until the last minute.

79. Is not local and misunderstands the market.
80. Is too busy to complete the appraisal on schedule.
81. No comparable sales are available.
82. Is not on the lender´s "approved list."
83. Makes important mistakes on appraisal and brings in value too low.
84. Lender requires a second or "review" appraisal.

85. Too "picky" with conditions and "scares" the buyer.
86. Infuriates the seller.
87. Home inspector not available when needed.
88. Inspection reports alarm buyer and sale is cancelled.

There is a lawsuit going on in Minnesota. The suit alleges that a real estate company and its agents directed clients to use a particular settlement firm without disclosing that other settlement companies had lower fees. The real estate company in question had a relationship with this settlement company and the agents whose clients used this company also received their commission checks more quickly.

I don't have all the facts in this case so I won't be judging what's true or not in this instance.

But it seems like a good opportunity to discuss how settlement companies are chosen.

First you should know that real estate firms and settlement companies alike are bound by something called RESPA (Real Estate Settlement Procedures Act). This act mandates that consumers receive disclosures detailing things like relationships between companies and also says that kickbacks are illegal! If you want more information on RESPA, HUD has a good site with detailed information.

Every client or potential client gets, early on, the RESPA form detailing all the relationships my brokerage has with other affiliated companies. I give them time to look through the list. If I know at that point in time that I'm going to be recommending a particular vendor on that list, I let them know. I also let them know that the choices are always entire theirs and that I receive no incentive to steer them one way or another.

When I'm sitting down to discuss settlement with a client I ask them if they have a settlement company they'd like to use. 99% of the time the answer is no. Since typically the only experience consumers have with settlement companies is when they close on a real estate transaction and since settlement companies typically don't nurture those relationships with buyers and sellers over time, most consumers have no idea who the settlement companies are.

If my clients don't know a settlement company or don't have a specific preference. I will give recommendations. Those recommendations are based on my knowledge of the companies and how they do their job. The most important consideration to me is that the transaction moves smoothly to settlement and that there are no unpleasant last minute surprises for my clients.

When I have a client for whom I know every penny is precious and could mean the difference between getting the house or not getting the house, I work diligently to choose the best settlement company with the lowest costs. Sometimes settlement companies will offer discounts or coupons and that's a great time to make use of those.

The bottom line is that consumers always have choices. It is a real estate agent's responsibility to disclose everything! It is also the consumer's responsibility to read the mountain of paperwork that they get. Neither agent or consumer should be let off the hook for not doing their part in this!

I just had another contract come in on one of my listings that designated a settlement agent far away from where the actual property is located. In this case the property is in Culpeper County and the settlement agent was in Arlington. This is not at all uncommon.

While the regional contract lets the buyer choose the settlement agent, the reality is that most buyers don't know any or don't have any preference and so the agent chooses. The agent makes their choice based on who they know will get the job done and based on convenience for themselves and their clients.

The problem arises after settlement when the settlement company needs to record the deed at the county courthouse in the county where the property is located. I've consistently run into settlement companies who are in no hurry to rush out and record the deed because it's just not convenient for them. This delays funds being released to my seller, which often delays their ability to close on their next home, particularly if they're buying their next home out of state.

I've solved this dilemna by giving the buyer's agent and their clients a choice in these situations. If you still want to use the designated settlement agent who's located out of the area, we add a clause to the contract saying posession, including the handing over of keys doesn't occur until after the deed is recorded. Since the buyers want into their new house, they've now got incentive to lean on their settlement agency!

Or, their other option is to move to a settlement agency nearby who will have the ability to typically record the same day as settlement.

Overall, this policy has worked well for both myself and my sellers.

Are there other agents or sellers out there who have run into these issues? Do you have other ways of addressing them?

One of the toughest part of trying to buy your first home is finding the funds for a down payment and closing costs. So, I thought it made sense to talk a little bit here about some of the options that are available to help you do that.

First of all, you should know that there are mortgage programs out there that will allow you to finance the entire purchase with no down payment at all. The availability of these programs to you will depend on your credit scores and the lender you choose. But I'd also like to make the point that perhaps people who have no money for either a down payment or closing costs should wait before buying a home. Once you buy that home and don't have a dime to your name, what happens if you have a large, unexpected expenditure? What happens if you unexpectedly lose your job? Life can change suddenly and it can make sense to wait to take on a mortgage commitment until you have some reserves for emergencies.

If you're fortunate enough to have family in a comfortable financial situation, many loan programs allow them to provide you with a gift of cash to help. There are IRS limitations as to the amount they can give you.  And you'll need to disclose to your lender that you're getting the gift. Or, your family may be able to give you a loan to help with the down payment. Again, this will need to be disclosed to the lender. And the amount they can loan you will vary depending on the lender and the loan program.

If you've been working for some time you may have a 401K that you can borrow money from for the purchase of your first home. There are obviously consequences to taking money set aside for your retirement and using that to purchase a home. And you should seriously weigh the pros and cons before doing this.

But I'd also like to suggest a very old fashioned idea, saving money until you have a down payment. Saving money is out of fashion these days! We live in a very materialistic culture that is constantly sending us messages to buy, buy, buy!  But taking a counter-culture approach to this can be very financially rewarding! After all, study after study suggests that all of our stuff is not making us any happier. In fact, the freedom to quit a job you absolutely hate is much more likely to make you happy than that Plasma TV! And there are some organizations that now exist to help you design a life with more financial freedom.

One of those is The Center for a New American Dream. They've got a bumper sticker that says "More Fun, Less Stuff!" I think that could a great motto as you work to build your down payment! Check out their web site for lots of information on how you can find ways to enjoy life more and spend less! http://www.newdream.org  Their newsletter features the slogan "Live Conciously. Buy Wisely. Make A Difference." It's not a message that you're going to hear much from all those credit card companies and retailers hoping to capture your money!

Another great web site for helping you have more with less money is http://www.freecycle.org  Here you can ask local individuals if they have things you need that they'd be willing to part with at no cost. Or, you can get rid of your excess stuff so you don't need as big a house!

However, you go about finding the money to buy your first home, I am a firm believer that buying a home is one of the smartest financial moves you can make! Feel free to share your ideas here on other ways to find that money!

As a buyer, you're entitled to a Good Faith Estimate from your lender. By law the lender must deliver this to you within three days of getting a copy of the ratified contract.

So, first of all, make sure your agent gets the contract to the lender as soon as possible once it's ratified! Then, make sure you hold your lender accountable for providing the Good Faith Estimate and getting it to you in a timely fashion!

This estimate, while it is an "estimate", should be very accurate. What should absolutely be written in stone on this are the lenders fees. Barring you're agreeing to a different program later on in the process, these fees should be absolutely accurate.

The GFE should go with you to settlement. In fact, you and your agent should compare it to your HUD1 as soon as that document is available. (The availability of HUD1s will have to be a whole 'nother blog!)

If the lenders fees do not agree with what you were given on the GFE stop and talk to the lender and make sure this gets fixed immediately. Do not sign the HUD1 without making sure those numbers are accurate!