Expert: Ray Beggs - 12/18/2008

Question
We are in Southern California and are trying to buy a home. We found a house we thought would work for us and made an offer which was accepted. We really wanted to use our credit union for our lender, as we have extensive history with them and feel comfortable with them. The real estate agent we are using seemed at first to be very helpful and on our side, however through this process, we have felt that he has not operated in our best interest. He continually told us that while we "have the right to use whichever lender" we want, that if we went with our credit union, we would lose the house. Through much pressure and (i feel) strong arming, we finally agreed to go with the lender he wanted us to (we found out later that the realtor, the lender, and the person handling escrow, were all in-house... not independent as we had originally been told). After signing all the appropriate papers, transferring our down payment to escrow, etc., we were told escrow would close in a few days (this was the first week of November... and the reason we "had" to use their lender was because if we didn't close by the 31st of October, the seller was going to back out, according to our agent, and his lender could deliver the close at the end of October, and our credit union would not be finished until the first week of November!) As it turned out, the other lender couldn't complete everything by Oct. 31, either! Also, ouir credit union was offering us a loan with an interest rate that was almost a full percentage point below the other lender, and our closing costs with our c.u. were going to be about $3000 less! By the 2nd week of November, we were notified that the first lender backed out because there was some issue (we still have not been informed of the exact nature of the issue... only that it has since been "resolved") with the deed to the house. At this point, we contacted our credit union and asked if they would continue the loan process since that is who we really wanted to use in the first place. The agent told us that his broker at the mortgage company was applying for a new loan through several other lenders. We notified both of them in writing that we were going to use our credit union and to discontinue pursuing a loan through any other sources. They went ahead and submitted a new loan to escrow through their new lender after we asked them not to (all the while he continued telling us we could "of course" use whatever lender we wanted). So my first question is can they submit a new loan from a new lender, when we specifically asked them not to, and when we have not signed any new loan docs and we do not even know the terms the new lender was offering?
Meanwhile, there had been an appraisal done of the house, which appraised it about $25,000 higher than what our offer was. Initially, our credit union agreed to go ahead and accept that appraisal, however do to the behavior of our agent, the asset manager, the mortgage broker, and the escrow manager (requested docs, etc. were not provided to our credit union in a timely manner, promises to us from our realtor that if we went with our credit union, the seller would back out and so forth), our credit union became quite concerned that there may be something about the house that was not on the level. This continued behavior convinced our credit union that they should have a new appraisal done. Repeated requests and calls trying to arrange access to the house for the new appraisal were completely ignored (I believe in order to stall our completion of the loan with our credit union) and we were once again told that if we did not sign the papers with their lender, the seller would back out. We told him we were going to use our credit union anyway. They then told us that we had 24 hrs to sign the docs with their lender or forfeit our earnest money. We told them we wanted to use our c.u. Then we were sent paperwork to sign stating that we cancelled the deal and we now were supposed to agree to pay a $530 cancellation fee, on top of forfeiting our $1000 earnest money. We didn't sign it because we don't feel that we canceled and we didn't agree with giving up that money. We got a phone call threatening to sue us, next. Then we got a phone call stating that we had until 5pm the next day to sign docs with OUR c.u. That was impossible, because they never let our c.u. get in to do an appraisal. Well... the seller would not be willing to wait another week for us to complete the new appraisal, etc. so we did nothing. On monday, we decided it was no longer worth the hassle and anguish, they could keep the $1500, we just wanted our down pymt money back out of escrow so we could look for a new house. So we signed the cancellation papers and mailed them Monday night. Tuesday, we got yet another call stating they were going to give us ONE MORE chance to sign with their lender and take the house and we'd better do it or the seller would be taking all of our money in escrow (approx. $26,000 or so) from us and would keep it tied up in legal battles for the next 5 yrs. My next question is, we thought they couldn't hold our escrow money... only our earnest money? While in my heart I believe (because there have been so many "ultimatums"), this is just another empty threat... we are terrified of not having access to that money and possibly even losing it altogether! We also have become more and more convinced (at the risk of sounding paranoid) that there IS something hinky with the house because they keep trying to get us to sign for it! We don't know if we should sign the loan docs with the lender we don't want... or will we lose all our money...or will we end up with a house that has serious problems... or what!!!! By the way, today we called our c.u. and asked them if there was any way they could do an appraisal and push through the paperwork quickly so we could close using them, and they told us they will loan us money for any other house, but absolutely not would they do ANYTHING with this house from here on out because of everything! Any suggestions, insight, advice, etc that you could possibly give us would be so greatly appreciated!! Thank you! Laura

Answer
Whew! Sounds like you didn't have a real good time with this and I'm sorry for all of the problems you're having with your purchase.

I'm going to have to direct you to a real estate attorney, because this question now goes beyond my scope.

Best of luck,

Ray