New Tenants

I have a vacancy right now so I was showing a rental to perspective renters this week.

As we wandered through the house, we chatted about the house and what was going on in their lives. Turns out, they had purchased a house a couple years ago. They loved the house, put all their money into updating it and landscaping. They figured they would be there forever.

A year or so in, they were visiting friends in Tahoe and wondered if they could buy a second home. It was at this time that they pulled out their mortgage papers to figure out what they owed on their home. After reviewing the loan statements, they realized they were in a negatively amortized loan AND it would re-adjust within the next few months - raising their monthly payments to over $4000/mo.

These are very responsible parents of teenagers. They have perfect credit and have stable long term jobs. It took them a few months to reconcile their disappointment and consider their options but, they were able to put their home on the market and are currently in contract with expectations of closing by the end of May.

These people relied on their Realtor and Lender and didn't know enough about the process to know the questions to ask.

Frankly, it pissed me off. I have been to signoffs where I read and explained the loan to my clients, they weren't getting what they thought, and we extended escrow to work it out. I've also been to signings where I explained, it wasn't what they thought and they chose to close anyway. Either way it's the clients' decision but, it pisses me off that someone that is working as my agent sells me a book of goods so that they get paid.

I understand that I don't get paid unless we close but, I need to feel like I am helping my clients - first and foremost. I have been in this profession for 20 years and I have clients from 20 years ago. What I don't have is clients that are losing their homes because I didn't review their loan docs.

Before this I thought these people in crappy loans were just stupid or lazy or deserved their fate, somehow. I believe in caveat emptor and personal responsibility. I also believe in full disclosure and taking care of your clients.

Do you know someone that is in a crappy loan? How did they get there and where did the system break down?