A buyer’s loan for a condominium property was in jeopardy because of difficulties with their HOA (Home Owner’s Association) insurance. The renewal of their HOA master insurance, the required fire insurance that replaces the complex in case of fire, had been denied. Every lender requires a valid master insurance policy in place that doesn’t expire for at least three to six months from the time escrow closes on the purchase.
The existing policy had been extended from its original expiration date to two weeks after my buyer’s purchase was supposed to close. But the lender was requiring a policy that was good for at least three months after closing. The HOA had waited until the last possible day before settling on a new insurer and policy, which meant I had to extend the loan transaction beyond our original closing date by over two weeks.
We had locked the interest rate when the loan was originally in contract and I had locked it with a one-week cushion, just in case something unforeseen came up that would cause the transaction to not close on time. I typically do this as long as it doesn’t impact the cost to close for the borrower. But in this case, we needed two more weeks, requiring us to extend the lock beyond its original expiration date.
At the time of the lock, interest rates were down from where they were when I needed to extend the lock. In this situation, the lender will usually require the borrower to pay an additional fee in points to extend the rate lock period. This issue was not my borrower’s fault so I worked with the lender to get the lock extended for one week for free, based on my relationship with the lender. Then I worked on negotiating with the seller’s agent to have the seller pay for an additional five days of the lock extension since this was an issue with his property and the HOA. I was able to get the seller’s agent and the buyer’s agent to split the cost to extend for the remaining three days or so with me and we all split the final cost to extend the lock between the three of us.
Another complication was that we had removed our loan contingency prior to learning of the insurance issue with the HOA. But I was able to work with the seller’s agent to get her to work with the HOA to help them find a new insurer and to allow us to extend the escrow period with no consequences for my buyer.
At the end of the day, everyone was happy! My buyer not only got to close on her new property but also didn’t incur any additional costs due to having to extend the escrow period and the rate lock. And she kept her interest rate in a rising rate environment along with the original terms I had negotiated on her behalf at the very beginning of the transaction.