Mark in SD posted this link on BMIT about the credit crunch, and how banks are tightening their underwriting guidelines across the board - from mortgages to credit cards:

http://www.mcclatchydc.com/227/story/40246.html

This house is a good example - it's on Ditmar in South Oceanside in an area that we call 'Baja Carlsbad' because of it's proximity to downtown Carlsbad about a mile away.  It is a typical 1950s-style bungalow that has been expanded and remodeled over the years.  Most thought it was tastefully redone, and a cool house, but hard to justify the price due to the lack of sales lately.  There haven't been many closings in South Oceanside this year in any price range.

I had it listed for $699,000 in February, and though everybody who saw it, loved it, we only had one offer that was contingent on their previous house selling, and that ended up falling through.

Around the 1st of May an agent submitted an offer for $650,000, and said it was all his buyers were going to pay.  With the lack of comps available, and the need for the out-of-country sellers to close this deal, it sounded like a reasonable proposition.

But the sellers were tight on equity - their loan was $620,000+.

Somebody had to budge.  But the sellers didn't have the dough, the buyers wouldn't come up on price, and the buyer's agent wouldn't move off his 3% commission that was offered in the MLS.  Do I do something, or let it crash and burn?

I stepped out of the deal.  What use is it to let the deal fall apart?  We had tested the market for three months, and it was clear no other buyers were going to come along and pay more, so I was going to end up with nothing either way.  I might as well get out of the way and let the deal happen, and maybe down the road something good will happen out of it.  I could have carried a note for the commission, but I'm not a collector - if the sellers can send me a check someday, great, or get the other agent to throw a referral fee my way, terrific.

I sent over all of the signed disclosures too, so the buyer's agent had a pretty easy road to the finish line, if he could get an appraisal to come in right.

But the rest of the story shows how tight/nervous/conservative lenders are getting.

The appraisal comes in at $615,000, a fairly significant $35,000 short of the purchase price.  The buyers planned for a 20% down payment, but thankfully they had some extra dough, so they agreed to bring in the difference in cash.  So now it's up to a little over 25% down payment.

They sign loan docs, and the lender funded the loan - which means they wired the money to the title company.

But then the underwriter double-clutches, and decides that they need AN ADDITIONAL 5% down payment, bringing it to over 30% down.  They insist that the first funding gets wired back to them, and the buyers bring in another $32,500, sign docs again, and it finally closed last week.

For those of you who are contemplating waiting until next year to sell - re-examine what you are up against.  If you are in an area where prices could miraculously hold up, consider that the lenders are  nervous, and their additional demands will further shrink the buyer pool - not many buyers would have done, or could have done, what these buyers did. 

If you're selling, get 'er done!  In fact, if you think you might wait until next year, even if it means having to take a little less, you might as well lower your price today and get it over with!

(I heard this story from the other agent, who did say he's going to send me a check)