Asset Management & Recovery: A Default Lesson

Good morning folks.  When I am not ranting and blowing off steam with silly posts, I try to make a point that will be helpful to someone.

Today it is a quick reminder about what the dates outlined in the contract really mean.  A lot of people in my world have forgotten that the timelines in a contract mean something.

Did you know that if you fail to inspect and reject a property within the timeline for inspection, you may have ultimately accepted the property and waived your contingency?

Did you know that if you fail to transmit your Lender Letter in time, you may be in default and the seller may be able to cancel the contract?

Here is the big one. 

Did you know that if you FAIL TO CLOSE on time you may be in DEFAULT on the contract?  Did you know that the Seller MAY not extend the contract?  Did you know that you may LOOSE your deposit?  Did you know that you may loose your deposit AND possibly be liable for a shortfall if the property is sold for less to someone else?

I can only speak about the contracts I am involved with, but almost all of my files have decisions being made based on timeline.  The deposits required are based on risk and a calculation of cost to cover expenses in the event of a default.  I can't tell you how often we decide to accept price or terms because the property will close at a certain time.  This could be at the end of a quarter.  It could be because of a change in weather.

Do you know one of the reasons that REO sellers want the closing to be at their title company?  It is so there will NEVER be a late closing due to an error with that vendor.

Do you know why some lender sellers are requiring buyers to be approved by their preferred mortgage company?  It is so there can't be any games played concerning not being able to get the buyer financed.

True Story - 2 years ago we defaulted a buyer and kept $112,500.  We were in contract with the backup buyer the same day and closed within 10 days.  Seller made more money.

True Story - This summer a deal failed to close on time because the loan officer was "too busy" and couldn't "get around to it in time".  We defaulted the buyer and sold to someone else.  Buyer sued LO.

True Story - Buyer told me yesterday that they have not been able to get financing covered yet on their non-contingent cash offer.  They are not going to close on time.  We have a timeline issue for the seller.  There will be no extension.  We need to go to Plan B ASAP.  The default letter has already been written and is sitting on my desk.  The ads for the auction are already drafted and are ready to send out.  Guess who is holding the deposit?  Guess what else?  It's not small.

Folks - These things happen.  Contracts are real .  Blown timelines have consequences.  They get expensive.