Buying or Selling a Home/Loan Status Report

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Expert: - 2/9/2010


Question
Todd,
I'm a Realtor in the Phoenix Metro Area.  I'm not new, but I've got a question that makes me feel like I'm new!  The question is about Loan Status Reports.

For the benefit of the non-Realtors reading this, the Loan Status Report (LSR) is a document filled out by a home buyer's loan officer.  We use this in Arizona. It indicates what loan amount that home buyer qualifies for.  When the home buyer submits an offer on a home, this document is submitted with it.  

My question: Lines 3 and 4 on the LSR say this:
"Buyer intends to obtain a loan on the following terms:  
Purchase Price $[Blank for loan officer to fill in amount]"

Is it considered unethical at all for the loan officer to fill in an amount in this "Purchase Price" blank that is less than what the buyer could actually qualify for?  I was wondering if it might be a way for a buyer to dupe the seller into thinking he [the buyer] has less money available than reality.

Thank you.

Answer
Hello Gilbert REALTOR - A loan officer can place an amount in that blank that is sufficient to acquire the property yet may in fact be less than the amount the buyer 'could' or may qualify for. The buyer/buyer agent has a duty to disclose to the seller/seller's agent any known issues that may lead to the buyer's inability#ies# to close the transaction... but does not include any obligation to disclose the buyer's maximum ability to acquire/finance. The LSR is a document that as an accompaniment to the Finance Section beginning on page 2 of the AAR Residential Purchase Contract RPC 05/05 discloses the term and conditions of the buyer's finance contingency. Therefore, even if the buyer were to qualify for 'a loan' but not according to the terms set forth in the contract and LSR, the buyer could issue an 'Unfulfilled Loan Contingency' and receive a refund of the earnest money deposit because the loan contingency was not met. Of course, providing there are no other conditions that would prevent the buyer from retaining this option. Does it seem reasonable that if someone were paying cash for say a $100,000 home and has $1,000,000 in the bank the buyer/buyers agent would be required to disclose the buyers entire bank balance or total assets? Or, just verify they have the ready and available cash to satisfy the purchase settlement requirements? To take this one step further, the buyer's agent could be required to withhold this information even if they knew it under confidentiality, unless instructed to do so by the buyer. If you have additional questions regarding this matter please reply to this post. Thank you - Todd Menard

Buying or Selling a Home

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Todd C. Menard

Expertise

National Association of Realtors Code of Ethics and Professional Standards * Contract Questions: 05/05 Arizona Real Estate Purchase Contract, Exclusive Buyer Broker Contracts, Listing Contracts and associated contract documentation as it relates to boilerplate, covenants, contingencies, procedures and procedures. * ARMLS Arizona Regional Multiple Listing questions * Real Estate Professional Standards and Practices, Ethics, Obligations, Duties * Agency relationships in Arizona, Procurring Cause * Questions typicaly arising during the listing period * Questions typically arising during the escrow period * Questions about working with a real estate agent/REALTOR * Questions Related to New Home Builders

Experience

National Association of REALTORS Board of Director (2011) Arizona Real Estate Salesperson License (1991-1995), Arizona Real Estate Brokers License (1995-Present), Arizona Association of REALTORS Board of Directors (2008-Present), Arizona Association of REALTORS Professional Standards Committee (2008-Present), AAR Certified NAR Code of Ethics and Professional Standards Instructor, Southeast Valley Regional Association of REALTORS President-Elect (2011) Southeast Valley Regional Association of REALTORS Board of Directors (2008, 2009), Southeast Valley Regional Association of REALTORS Grievance Committee Chairperson (1998-2007), Southeast Valley Regional Association of REALTORS Bylaws Committee (2008-Present), Southeast Valley Regional Association of REALTORS Education Committee (2008), Arizona Association of REALTORS Forms Committee - Residential Purchase Contract (2005), Arizona Association of REALTORS Forms Committee - Residential Rental Agreement (2008), Arizona Association of REALTORS Forms Committee - Buyer Broker Agreement (2009), Arizona Association of REALTORS Presidents Advisory Group, Road to Professionalism (2009), Arizona Association of REALTORS GRI Curriculum Review Committee (2009), Arizona Department of Real Estate, Commissioner's Education Advisory Group Sub-Panel B (2010) Arizona Department of Real Estate, Commissioner's Statute and License Review Committee (2007)

Organizations
National Association of REALTORS, Arizona Association of REALTORS, Arizona Real Estate Educators Association (AZREEA), Arizona Regional Multiple Listing System (ARMLS), American Notary Association, Southeast Valley Regional Association of REALTORS (SEVRAR), Southeast Valley Regional Association of REALTORS Women's Council of REALTORS (2010-Present), Phoenix Association of REALTORS (1994-2000, 2005-2009), Scottsdale Association of REALTORS (1994-2000, 2005-2009), Maricopa/Glendale Association of REALTORS (1994-2000, 2005-2009),

Publications
"Real Estate in 2008"- Lifebushido Publishing (Contributory Author), SEVRAR Magazine, Internet Crusade, RealTown ListServe, Blogger.com, Active Rain

Education/Credentials
- AAR Certified Ethics and Professional Standards Instructor, Graduate REALTOR Institute (1993), Certified Negotiation Expert (CNE), Over 100 Hours of annual real estate continuing education, Annual Ethics and Professional Standards Development Workshops as required by the National Association of REALTORS, Approx. 36 hours of NAR Code of Ethics training annually, Numerous IDW, Seminars and Train the Trainer programs, Business Management Degree - 1981

Awards and Honors
2009 REALTOR of the Year Award, Southeast Valley Regional Association of REALTORS (10,000+ Members), Double Platinum Production Award ($45,000,000 Sales Volume)- Keller Williams Realty Int'l (2001), Top 15 Sales Production Keller Williams Realty International (2001), Top 5 Sales Producation Keller Williams Realty Southwest Region (2001), Top Recruiter Award - Keller Williams Realty Int'l, SW Region (2002), Who's Who in U.S. Executive (1983), Who's Who in U.S. Real Estate Professionals (2007)

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