Even if you have been working with your favorite real estate agent for the last 9 months, even if you have already looked at 20 homes with your favorite agent, even if you have already had the home builder install your favorite colors and appliances, I will not do your loan until you call Tommy T Thomas over at Big Builder Incorporated and speak with one of his agents. Now you do not have to buy one of Tommy T's homes but you do have to go look at one and let the sales agent check your contract with the home you think you want to buy.
Sounds ridiculous doesn't it? It would be an insult to you as an agent or builder for me to require "my preferred agent" to read over the contract would it not? Even if I said, "You have to do this but you do not have to use my agent. They are only involved as a safety net to make sure if you can't get it done they will step in and make it happen."
There is no difference when you as a builder, agent or real estate broker demand my client, with whom I have been working for months, in a business I am as good at as anyone in the nation, speak with some other lender. Especially when that lender is my direct competition. You think I don't remember that the next time I think about referring one of my hard earned clients? How would you like it if I kept a list that I gave to my preferred agents and said, "Never show any of these homes from this builder or agent because they pull this monkey business."
Yes, monkey business. The reason they give is to "make sure in the event the current lender can't get it done 'thei' lender can". Okay, that's insulting. If I can't get it done THEN you defer to someone else IF my client, the one I created with my hard work and advertising who may not even originally have been interested in purchasing a new or additional home until they spoke with me as a result of my efforts.
What if you went to Snarky's Department Store and pulled out your trusty credit card to pay for your purchase and the sales clerk handed you an application for a Snarky's credit card and said, "We can accept your major credit card but first you have to apply for our Snarky's card"? Or what if you actually spent all of your time driving around to business association meetings and loan officer's conference handing out your cards and sending greeting cards and newsletters and doing free workshops to generate prospective clients but when you went to present a contract to the listing agent they said, "We'll accept this after our inhouse agent has a chance to sit down with the client and review your contract and make sure you've done it right?"
Oh, I know, you've got the hammer of threat of law under the buyer-broker agreement. How nice. Now you're going to tell me about the time your clients were pre-approved with so-and-so and how the pre-approval wasn't worth the paper it was printed on. Be careful what you say, I've been in this business for a long LONG time and I have a lot of horror stories that fly in all directions.
Yesterday, a client I have known all my life, working with an agent whom I have known all of her life, called and said, "The seller won't accept the offer until they get me pre-approved with their bank." My first thought was, "well it's a bank owned property and some banks work that way." In that case I really didn't have an objection but when I found out it was the LISTING AGENT and not the SELLER and the LISTING AGENT/BROKER required the pre-approval from a CORRESPONDENT LENDER and I work for a DIRECT LENDER I definitely took note of it. I took note of the listing broker's name and the listing agent's name for future reference when I have clients who are shopping.
Think about it, comment about it or state your case. I know what you may say your reason is but I will remind you what an insult it is to a consummate professional who generates their own leads and refers them to local agents. It really just confuses and concerns the client and if that's how you want to treat your clients you can know what they think of it - they do NOT like it. Clients are very careful with choosing with whom they share there very private and confidential information and being forced to do so does not make them happy. I know it doesn't because even when they are not my client I have had them call me for my professional opinion on this specific activity. And do you know what they suspect you of? That's right ... under the table agreements with the lender to get an illegal kick-back.
Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683
Hmmm.... I understand some of your objections. But not all. While I have never as a Listing Agent required buyers to get pre-approved thru my "preferred lender," my ex who was a builder did, and still does. No he does not require them to use his people (and he gives them 3 options btw), but after all the loan fraud that was going around and bounced deposit checks and so many other shenanigans, he had to do something to protect himself to make sure he was building a house for a REAL buyer. You have no idea how much money we lost before we implemented this plan, because people we started homes for, simply couldn't get to closing, and had ordered upgrades and extras and the like. It really can devastate a small family homebuilder to eat all those costs.
I would recommened any builder, in particular, to implement such a plan. We never did "in-house" lending so we were never trying to scam a buyer into "our services." We were simply protecting ourselves.
Lori - your comment made me smile. I grew up (literally) as a builder. My dad was a local builder for most of my formative years so I see it from that perspective as well and we certainly had people who could not get financing after custom completions were done back in the 70s and 80s when interest rates were in the 20s. Your comment that made me smile is you said you understand my objections but not all of them. I think you understand them all you just don't want to be on the receiving end :) at least your husband provides a list of people to choose from. It would also be nice if builders like that provided a vetting opportunity for any loan officer. I would be more than happy to share my resume and references with anyone. Also, I develop my clients "from scratch". In other words I take people who could not qualify for a loan two or three years ago and work with them until they can. These are clients I picked up by spending tens of thousands of dollars in advertising, free training seminars, free credit counseling classes, etc. I AM VERY PROTECTIVE of those relationships. It can cost hundreds of dollars in real cash and hundreds of hours of assisting a prospective client in becoming an actual client.
Ken, That's pretty much the norm in my market with REO properties. It's very frustrating, Usually our buyers prefer to not even look at the property. I understand completely why it's done but some of my buyers cannot get qualified through the preferred lender. A perfect example is a foreign investor. Not all lenders can do these types of loans. We use a very specific lender that only does them and uses private money when necesary.
But the biggest issue seems to be we can't reach the person that is supposed to be doing the qualifying!!! So in most cases we just move on to another property.
I have found that when I am working with someone who already has a relationship with a Lender...thay steer away from property with that stipulation.
I too give it a wide berth....I have spent time developing relationships with people I trust to do a good job....why mess with an unknown? And what's in it for them ? A little hand greasing?
IMO it's a foolish (and limiting) way to do business...
I recently had a situation where the buyer had a lender and the "preferred lender" kept talking about how they could beat it and that the buyer needed to talk with then more... The preferred lender dicked around so long that the buyer walked on the sale and the property went to auction. Their lender didn't have time to do the sale anymore.
The buyer gets a little blame for letting it go on so long, but the bottom line is that the preferred vendor screwed the listing agent out of a sale.
I get it! If a client comes to me already approved by another broker/lender I will leave that relationship alone. Sometimes we have to get pre-approvals for REO or new build with preferred lenders but I completely inform them that it is only a formality to submit an offer and that they may choose whomever they like to do their lending.
Once I start directing a client to a preferred lender of mine, they are shopping Realtors all of a sudden.
We need to respect relationships that others have built if we want our relationships respected.
Maybe you misunderstood me Ken. We most certainly allow the buyer to use their lender of choice. We just like to verify good credit with one of our lenders. But approval of the offer may be subject to credit check by our lenders. Opening up that credit check to "Any vetted" lender does not offer us much of guarantee b/c we've seen so many bogus pre-approvals from lenders who were "friends" of the client. We do not try to steal clients away from their lender of choice. But sometimes they do find they can get a better deal thru our recommendations and are then grateful for the service. It's just a check & balance thing for us. CYA.
Great analogies and great comments. I too have seen the REO requiring pre-approval and have had buyers that I have approved with "nichy" progams not be able to even put an offer on a house.
Lori (this just now happened to me while I was writing this reply - ask Lane Bailey) - I think we're talking the same language but we've gotten on the other side of the mud puddle about it. The clients I'm talking about cost me hundreds of dollars each to generate out of my pocket. Of COURSE anyone can get them closed now that I've done all the work and probably at a lower cost because I'm going to recoup my cost of development. Yes, I've had it happen more than once when I spend months with a client and then they say, "Well my agent got me pre-approved at a lower rate and closing costs." Of course they did - because before us you couldn't qualify but because we did all that we did to help you now you qualify.
I know there are people in my business who are bad at what they do. There are people in every business who are bad at what they do. So I stick to my guns that I will not refer my clients to any builder or agent who "require" my clients (yes, I own them) to even speak to another lender/banker or broker who may lie to them, not know their history or finances nearly as well as I do, or just flat out do the loan for free to make me look bad. Dog eat dog and I'm not feeding my clients to the dogs. If every client just fell out of the air that would be a completely different story - but they don't. And they are not always loyal - that's where agents get the Buyer Broker Agreement (which I tell all of my clients never to sign) and we get squat. We can't even charge any nonrefundable fees.
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I hear you Ken. Great reading.