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Lita Smith-Mines Headshot

Don't Go Wasting My Time

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FEDERAL RESERVE MORTGAGE STANDARDS
AP

I'll share a little secret with you: sometimes, I'm happy when a real estate deal dies sooner than later. My delight in a speedy passing means I never advocated or sidestepped multiple renegotiations. A quick demise lets me dodge reading a home inspection report or discussing the intricacies of a plumbing's inadequacies. A fast collapse equals no contract drafting or review, and total avoidance of clause-by-clause confrontations!

A lot of work goes into a residential real estate deal after a buyer and a seller seemingly agree. Buyers may take this "meeting of the minds" as a mere starting point for renegotiation, based on items obvious from the beginning (That red living room needs three coats of paint to cover! Those appliances are 20 years old!) and those that were concealed (You put flammable putty there? That new paint job tried to cover up mold?)

As a lawyer, I'll convey the reasons a buyer wishes a substantial price reduction, or redirect negotiations as a seller desires. I may advise a buyer if a request appears unreasonable or counsel a seller to settle for the best she can get, but I'll always dive in and promote whatever position my client adopts. Negotiations can last weeks or even months, and even if everyone eventually agrees, more opportunities for the deal to become derailed are looming just down the tracks.

A deal subject to a mortgage is at the mercy of a lender, and money is rarely lent willingly these days. Lenders deny seemingly sound buyers for a host of reasons, or produce ultra-conservative appraisals from out-of-town appraisers that are out-of-step with local trends. Buyers, disgruntled anew, might grab a mortgage denial and run away from the deal. Alternatively, with their quest for additional price reductions encouraged by a tightfisted lender, they may soon find themselves rebuffed by incensed sellers who can't, or won't, lower their bottom line again.

Should a lender find both the sales price and the buyer up to its standards du jour, deals may still croak before closing when the dwelling is a condominium or part of a homeowners' association. Though 40 or 400 abodes may abide by the rules, a mortgage lender might demand a modification or revision before funding this one transaction. The two most recent responses from condo boards were 1) "We see no demonstrable need," and 2) "We'll take it under advisement at our next meeting [in 45 days]." Both deals crashed and burned, despite the joint efforts of the parties and their attorneys.

I don't actually cheer when an opportunity for income dries up, despite the impression I may give. When a transaction hastily expires, I'm far from jubilant. However, since there are opportunities aplenty for deals to conk out on the way to closing, I admit to feeling fortunate when a matter that comes in Monday falls apart on Tuesday or Wednesday. I then have more time to devote to deals that are not yet dearly departed.