Not my post - this is re-blogged, but well worth reading as it happens everyday. Unfortuntely, unsuspecting buyers are again being redirected to unscrupulous lenders who clearly do not have the buyers best interest in mind.
While the seller can mandate you get an approval letter from a specific lender - you DO NOT have to use that lender in the end, and in every single transaction I've seen cross my desk, MY DEAL BEAT the other lender hands down!
BUYER MUST BE APPROVED BY XYZ MORTGAGE COMPANY. WHO BENEFITS?
What is behind all of the listings that say "buyers must be approved by "XYZ mortgage company".
These third party lender requirements are included in about 1/3 of the bank owned listings.
EXAMPLES FROM A FEW LISTINGS FOR BANK OWNED PROPERTIES FOR SALE:
- "pre qual from Wells Fargo (REQUIRED!!)"
- "Pre-qual with Countrywide, free credit report and appraisal if Countrywide is used"
- "BANK OF AMERICA PREQUAL REQUIRED"
PRE-APPROVAL, PRE-QUALIFIED, BREATHING. We're used to this requirement in the listing remarks and generally don't object. While our buyers are well qualified and our contracts prepared in great detail with pre-approval letters, financial statements, etc., we understand that many contracts received by listing agents are not. Listing agents receive written offers that are incomplete and accompanied by so called "pre-approvals" where the only thing reviewed by the loan officer is the credit report. Quite often the loan officer has not verified the money to close or income to qualify. Once the listing agent receives our offer, they do not require third party lender pre-approval of our buyers.
A NEW TWIST ON AN OLD REQUIREMENT. In consultation with a Maryland broker in my network yesterday, the broker related a situation that was very revealing. While we're aware of this requirement stated in the AGENT REMARKS in many REO/bank owned property listings, this particular situation was very revealing.
ENOUGH IS ENOUGH. We understand the need for the seller to feel comfortable with the buyer's ability to close. However, this situation appeared to involve more than just verifying the borrowers ability to obtain a mortgage loan. After contacting the loan officer named by the listing agent as the person to review the buyer's financial information, the buyer called and related the conversation. There's something fishy in. . .
HOW FAR DOES A QUALIFYING LENDER GO?? The loan officer took the buyer's credit information and shortly, after reviewing the credit report told him that his credit was fine, however, to make sure that he got the contract, he should change his offer to include:
- a price of $xxx,xxx
- remove the home inspection
- etc., etc.
This, mind you, for a very, very well qualified home buyer with excellent credit scores, money to close and making a 106% offer with only a customary split of transfer and recordation taxes which is pre-printed in our contract of sale. The buyer did, however, want a home inspection.
WHAT'S UP, DOC? This loan officer is NOT the bank/seller. It is the loan officer identified by the listing agent to pre-approve the buyer. Seems to me that this lender, and the listing agent/seller, went beyond the normal pre-approval by a third party lender requirement.
The Maryland Association of Realtors Residential Contract of Sale includes a clause that states:
36. NOTICE OF BUYER'S RIGHT TO SELECT SETTLEMENT SERVICE PROVIDERS: Buyer has the right to select Buyer's own title insurance company, title lawyer, settlement company, escrow company, mortgage lender or financial institution as defined in the Financial Institutions Article, Annotated Code of Maryland.
WHAT PART OF "BUYER'S RIGHT" DO THEY NOT UNDERSTAND? The loan officer clearly gave the home buyer the impression that, if his suggestions were followed, that the buyer would be more likely to be accepted by the seller. What the buyer also got from the conversation was that this loan officer was not an objective third party lender.
WHAT'S GOING ON? Inquiring minds want to know.
* Is the listing agent using their property listings to STEER buyers to a loan officer?
* Is the loan officer giving the listing agent some benefit for these referrals?
Fortunately, the home buyer, an attorney, believed that the loan officer was going too far, broke off the conversation and immediately contracted his buyer's agent.
QUESTION: What action, if any, would you take or recommend that the agent take? I'm a pro-active practioner and prefer to take advantage of any opportunity to enhance our buyer's position rather than sitting by an doing nothing. I know what I would do.
I value the experience and opinions of my ActiveRain friends, therefore:
Would you relate the conversation to the listing agent?
Would you notice the agent's broker of this conversation?
Would you do nothing?
WHAT WOULD YOU DO???