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Buyer issues - multiple extensions & down payment delays

My parents just sold their home recently. Since it is a seller's market, especially in the Silicon Valley, they received multiple offers and the highest offer was $35k over asking. The buyers had a short sale behind them, but their credit has improved and they got the loan without issue. Life should be great, no? Nope. They had a few "ends" to tie up and asked for a 5-10 day extension on escrow. Not a huge deal, but now the extension is nearly up and they are asking for another 2 week extension. To come up with the down payment, buyer needs to transfer his 401k from his old job to his new 401k. Apparently, this needs to be done in snail mail letter form, not by phone/fax/email. He then must request to cash out the current 401k. Why would they have waited until after closing to secure their down payment and how long should it take for him to get the down payment funds? Both parties are thinking it could become a 60+ day escrow. In the meantime, my parents may lose out on the new home they are in contract to purchase if their sellers refuse an extension because of their buyers idiotic, poor planning. It's just crummy all around. Any realtor out there been in a similar situation with down payment issues caused by cashing out a 401k?
  • June 13 - San Jose
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Answers (4)

The Loan Officer should try and re-structure the loan to meet the deadline. I would have your parents have their agent do some due diligence. Find out exactly whom the 401k provider is and if that is, in fact the case. It sounds like your parents need some re-assurance. You should request a copy of the lender approval as permitted and verify if this is the case. Document the issues to the seller of the home your parents are purchasing to request an extension. With a good explanation and documentation to back up claims, they should be able to work these issues with the seller of the home they want to buy. Yes the market is hot, but putting the home back on the market and looking for a new buyer could take just as long or longer. 

Good Luck!
  • June 16
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2 weeks seem to be a long time.  Suggest charging $ per day during and after the extension. The buyers then is more motivated to meet the schedule. You can also stipulate your offer expires with no extension after YY days.

Do you have a backup offers with quick closing? With homes appreciating daily it is not common to cancel the offer and go after a new  and even higher offer.  

Most of Silicon Valley offers the sellers want no loan contingency since they do not want to go through what you are experiencing.  

Good luck,
Sam Shueh
Keller Wms Realty 
 
  • June 15
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Thank you for your reply!! Excellent question. I'm going to bring this up to my parents' real estate agent. The buyers are kind of clueless it seems and aren't working their quickest or in the most efficient manner to work out the situation :/
  • June 13
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Oh, I'm so sorry to hear what your parents are going through right now.

Have the buyers considered rolling over the old 401k to an IRA? I believe they'll be able to withdraw the money much faster that way.

Best regards,

Elva Wormley
Mortgage Consultant
[contact information deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines]
C2 Financial Corporation
2845 Moorpark Avenue, Suite 209
San Jose, CA  95128
  • June 13
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