I don't think stupidity is the reason.
I actually don't think the fine print is the only reason, but to address the fine print question"
A buyer goes through a stressful escrow period, committing to say 30 years of debt and huge monthly payments.
A normal escrow period is 30 to 45 days.
So lets say the buyer has 30 days.
During that time, he (she) must shop for a lender, apply for a loan, provide in depth paperwork, have the home inspected, maybe by a pest inspector, a home inspector, a roof inspector, a septic inspector, a structural engineer, a surveyor, a mold inspector, an asbestos inspector, a radon inspector - depending on what is initially discovered.
Any repairs or adjustments have to be negotiated during escrow.
The buyer has to review the title report and make sure the home is indeed on the correct parcel.
That there are no liens, or unacceptable easements, no zoning conflicts, no code violations....Then the buyer has to weigh all of the findings of these inspections and decide if this home is the right one.
all the while, the buyer is likely working to keep income happening.
Hopefully, lots of income because none of these inspections come cheap.
The costs are piling up daily.
The buyer also has to come up with - usually, at least 10% down payment and often 20%.
Also, the buyer has to cover title and escrow fees, and insurance.
And hire movers, pack a lifetime of "stuff", find new schools for the children, maybe train at a new job (In which case the loan is even more difficult to obtain).
During this time, the lender will provide the buyer with a general idea of the loan, subject to many conditions.
Finally, escrow docs are ready, as well as loan docs and the buyer goes to the title company.
Often, this happens at the very last minute with the seller threatening to cancel the deal, or the loan docs ready to expire.
At the title company, the buyer is met with one or two stacks of loan documents, each over thirty pages, possibly 50 pages each.
The escrow officer gives a general explanation of the "boiler plate' details and surely will go into more detail if asked.
He or she may not even know what each page actually means offhand without stopping to really consider.
The docs are just emailed or fed exxed or faxed to the title company and prepared for signing.
When it comes to the fine details of the loan, these are things that have never been fully explained to the buyer (despite disclosure laws) due to the final loan details not being solidified prior to closing.
At this moment, when the buyer sees these details and says "wait a minute, I never agreed to this.
What if I refuse to sign this?" The answer is often "then you can not buy the house." I know.
I have seen it happen.
It is not always the case.
But it does happen.
And the tremendous pressure, the last minute unveiling of the documents, the difficult to understand wording all contribute to the buyer just caving in and signing.
Seriously, the wording sounds like an English courtroom scene.
This moment is like asking someone who's loved one is being prepared for emergency surgery to sign admission papers prior to treatment.
Granted, no life is at stake, but the emotional pressure is phenomenal.
If we want real reform in loans, I think the buyer should have three days to consider the final loan docs before signing instead of 30 minutes give or take to sign about 50 pages of serious legal commitments.
I believe the law in some states is that the buyer is entitled to 24 hours to review the docs before signing, but in my experience, that was never the case.
More often than not, loan docs came in with hours to spare before the big threat of the loan expiring.
A buyer never even saw the docs before the signing appointment.
If a buyer pushed, often, the loan could be extended, but most buyers do not know this.
They are truly pressured.
Not by escrow officers, but by the timing, the underwriters, by needing to get back to work so they dont lose their jobs from all this extreme distraction and often by the sellers clamoring to close the deal.
The whole thing is ridiculously buyer unfriendly and needs to be redesigned so that a buyer really, truly understands beforehand.
In an escrow, there is timing for everything, including loan disclosure.
But there should be a loan mediator involved to make sure the buyer really understands the terms.
The mediator should have no affiliation with a lender, realtor, seller, buyer or title company.
Oh, yes, some will say, there are already laws in place to protect buyers.
Yes, there are.
Ever watch cop tv shows? The ones where they are required to mirandize a suspect? But only if the suspect is a suspect, right? So they can ask them all the questions they want as a witness without reading them their rights.
Until they SUSPECT them.
Well, isn't that handy? I don't know how true this tv stuff is, but you get the idea.
- darn, I ran out of room - lucky you!