"pre occupancy agreement" will kill a VA deal? (documents, appraisal)

[msrandolph84]

PLEASE ADVISE!!!! Very long story!!! Please hang in with me...


On a newer listing of mine, I received a call from a Broker, telling me it's my lucky day, she is sending me a full price offer for clients relocating from out of state because they just love the house. He is gome head honcho at one of the parcel delivery companies. They already had "approval" and everything was going to be great. We're going to have so much fun working together. Then she throws in "there's just one minor thing" they need a 45 day pre occupancy while their now "pre approved" loan is processed. The verbal offer was something insane. Since they're a little "cash strapped" they're wanting to make a full price offer, 275k, financing 100%, 500 EM, 1200 deposit, 30/per diem.

The buyer's broker was waaaay too supportive of this possibility, she personally guaranteed they would be able to qualify??? She has gotten to know them so well over the last year they've worked together. Sent me over the "pre qualification" along with their credit report??? Seriously! I did glance at it and there were open collections (medical), late payments on almost everything, massive child supported debt, prior tax liens, and a 670 mid, which is fine... but I could also see where the LO is attempting to re report open accounts, with balances and showing late w/in a year. That 670 seems super legit now.

I contacted the lender who supplied the "pre qual" and he received their final application docs the day before and could start processing when he got a PA. Talked to them 4 days ago and had absolutely NO doubt it would close. I asked for their DTI, he said 35%. I asked him to show it and he refused. Berated me about doing PSO for Va loans all the time and being asked to supply Listing Broker this kind of information. I didn't care, my job is to support my clients and present all the information to them, so they can make an informed decision. Plus, the buyer welcomed me to know everything about him and his wife???

My clients were STILL considering this, but we agreed it would have to be under a lease to protect them. I contracted the BB about the lease and the terms she present wouldn't be acceptable. She huffed and puffed and whined "I don't think we need thaaat." She then requested allow the Buyer to contact my Seller to talk it over... absolutely not.The The buyer called ME to make his case, he seemed very kind and genuine. Having to relocate for a new job and have a household income of $130.I asked what he does for the company, hes worked for 22 years as a delivery truck driver, wife is disabled, no other income sources. Mentioned he had one incident of debt resulting from a with a car accident and paid it right away.

I saw his credit report and all the misinformation was evident. 15k in collections, 60k outstanding child support payment at $1100/ mo, 3 mo auto loan at 799/mo. I asked how long he's been working with his Realtor, he said a month and at that point for me, it was over. Too many lies and inconsistencies. We countered with the terms of a regular transaction at full price and they didn't respond.

The next day I got a frantic call from my Title officer, saying DON'T DO IT!!! She said apparently, having a "pre settlement occupancy agreement" as opposed to a "lease" will prevent that loan from being to close??? I contacted my go to LO, he confirmed it. I Googled other horror stories with the exact situation.

The only thing I can find on the VA website, seems to suggest a buyer occupying the property before closing may not be kosher, but it's not addressed anywhere in specific terms. it just says, buyer has to sign an agreement verifying their intent to "occupy the property after closing" I could see that a pre-occupancy agreement could be really bad because of the parameters and requirements of a VA appraisal, but I don't know for sure.

I'm grateful I was able to get enough information that made it fishy before my clients agreed to it. They were okay with it at first, but different terms. Everything in ly listing has been re done and nothing has been touched. No way my clients were going to let that shiny new house be destroyed and squatted in. Unfortunately, a fellow Realtor's clients got suckered into it, because the Realtor got the Buyer and Seller in contact.

Can someone PLEASE explain to me this whole deal with the contract for a pre occupancy as opposed to a lease on a VA loan is. Or, is it really just not allowed for the VA buyers to occupy before closing?

[jghorton]

Apparently, the pre-occupancy thing has something to do with a VA provision to help families of soldiers stationed abroad. (Extract below from: http://www.benefits.va.gov/homeloans...rs/26_12_9.pdf

a. Occupancy of Property by Dependent Children of Veteran. The law requires Veterans
obtaining a VA-guaranteed home loan to certify intent to occupy the home. For Interest Rate
Reduction Refinancing Loans (IRRRLs) certification of previous occupancy is sufficient. In
cases where a Veteran is unable to occupy the property because of his/her active duty status as a
member of the Armed Forces, certification of occupancy by the Veteran’s spouse is sufficient.
Under P.L. 112-154, the occupancy requirement is also considered met if a dependent child
occupies, or will occupy, the property as a home and the Veteran’s attorney-in-fact or the
dependent child’s legal guardian makes the occupancy certification. VA has amended VA Form
26-1820, Report and Certification of Loan Disbursement, to accommodate this change. The
form was posted online on October 3, 2012, and is available via Search VA Forms.
For any loan closed subsequent to that date, the new VA Form 26-1820 should be used.

It seems pretty vague, but, does seem to entail a firm loan commitment by the VA. Given the very shaky financial situation and history of your buyer, that seems like an 'absolute must!' -- You will want to be extremely careful to ensure that you don't wind-up with non-paying 'occupants' whom you can neither 'close' or evict. ---Perhaps you can get more information directly from the VA.

[ocngypz]

The guy's a deadbeat.

You and your clients dodged a bullet.

Good job on your part! Kudos!!

[cully]

All the manic stuff from the buye rand buyer's broker.... sounds like a set up. Carnie fast talk. Let it go. Give the loan officer's statement.

For fun you might google the buyer's broker and buyer or the buyer's address or something and find additional cons they are running elsewhere. You already know anyway.

Thing is what was the buyer going to do once he was in the house. One of those situations where he claimed to be the owner by occupying the house and never leaving?

[msrandolph84]

I did actually contact the VA and the representative said loans with no down payment, require the property be "new-to-you"... I asked for clarification and they pretty much said it's open to interpretation. He wouldn't give an answer and I would ne to contact a VA lender, or RE attorney.

The lenders I've talked to are actually split. I have 2 local lenders say it can't happen, one of whom has personal experience in it.. The Buyer's lender said it's fine and another LO said it is permitted as long as there was no prior relationship between buyer and seller

@ocngypz, I appreciate that. I also think he just might be, but I don't honestly care,, ya know? A dirt bag can buy a hose, just not if he's a liability to my sellers. I do have a MAJOR issue with their Realtor. She has fiduciary responsibilities to not just her seller, but also top the transaction.

I hope for the best for the contract they're in. I hope it closes and everyone is happy. If this does end badly for the other sellers, I can't imagine how messy that'll be...

[oregonwoodsmoke]

There is no way I would allow that person into one of my rentals. No occupancy until I have every penny of the purchase price and the sale has closed, funded, and recorded.

I have trouble believing that anyone would give him a mortgage with that terrible credit and history of non-payments.

Suggest that he find a short term rental while he waits for his mortgage to go through.