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Predatory Lenders or possibly Predatory Real Estate Agents.

I have a borrower at the moment that has had to fire three real estate agents. They have specifically told them they could only afford $200k. (In our market that is difficult to find) The agents, knowing that they were pre-approved for $250k, were only showing them houses in the $225k-250k range. When they were confronted they said "well I'm sure you could find a couple extra hundred dollars if we find the right house for you."

If a buyer comes to me, applies for a loan, I can't legally deny them a loan that they qualify for, even if they have told me they can only afford to pay a certain amount per month, and this loan would be $200 more per month.

So Now, who is being predatory?

I often here this same scenario where the real estate agent is showing people homes $10k-50k over what they were told they could afford.

I realize that there are predatory lenders but this problem can't be solely placed at the feet of the lending industry.

Why do you agree or disagree?

*Update* This was originally written when it was still a sellers market and offers were above listed price not below.

Posted by Drew Jelmeland~Home Mortgage, Loan and Accelerated Home Equity on 08/03/2007 06:24 PM

Comments (113)

predatory lender, real estate agent

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113 Comments on Predatory Lenders or possibly Predatory Real Estate Agents.

AUG

2007

It depends on the market. We're in a market where negotiation is bringing prices of homes down a good 3-10%. I look at the SOLD stats and see homes selling for much lower than list AND with lots of buyer credits.

In a $200K range, I'd be looking up to $220 or so, long time on the market, significant seller equity and easy to show and they should be able to get a good buy.

Perhaps the buyers aren't satisfied with homes that are listed for $200K.

I've had buyers want homes with features and size in the $300K price range but only qualified for $200K. They get rid of the agent because the agent can't find what they want. Not the agent's fault. Could be the buyer isn't going to be satisfied with the $200K houses.

As a Realtor with www.the-extreme-team.com and a Mortgage Broker with www.Trust-USA.com I don't understand this dilema. When a buyer comes in with a ceiling...you stick with it... That is what they can afford. I ask my customers, "When we go to closing, what is the final sales price you want to pay." It doesn't matter what the bank says they can afford on a pre-approval. The pre-approval is worth about as much as the paper it's written on. Show people homes they can afford. By doing this you don't waste their time, and you don't spin your wheels driving around showing property. I'd rather have a happy customer than one who gets right up to the final underwrite of the file and have it fail.

I ditto Lenn's comments. It totally depends on the market, and it looks like we're in the same type of market as she is. I always check the comps, and then go from there.

Lenn, thank you.

I do understand in this market looking at a home up to $220k. I also understand that these buyers are trying to find something very difficult. But these folks started looking last year when that wasn't the situation. They got frustrated and quit looking because of this situation.

The vast majority of the stories I've heard were before the current market.

Scott, Thank you.

Exactly the way it should be. My thinking is how are you going to get a referral from someone who loses their house in a year.

Teri, Thank you

In my neighborhood, the market is a buyer's market. It is not unreasonable to show homes 10% above the affordability price, with the anticipation of negotiating down. That would be helping the buyer maximize his return on his housing dollar

That is just bad business...to NOT do what youare told to by a client is not the right way to do things....

I would fire them too!!

=-/

Tend to agree with Scott..............the ceiling is the ceiling, unless it's part of a strategy to negotiate down, and if so, that should be made crystal clear to the buyer.

AUG

2007

In my market area viewing homes $20,000 or so above the "comfort" zone of my clients is not unusual at all. In fact, it is the rare buyer client who does not wish to look at the higher end knowing they will make an offer at the lower end of the range. There are so many homes to choose from that the odds are they will end up purchasing that $250,000 home for $225,000. I take my direction on which homes to set appointments for from my clients. If they say "Up to XXX" that's what I do.

Jim, I would agree with that. But the buyer needs to know what your doing.

Alexander, Thank you.

Seth, Good point.

Kris, did you discuss this whith your client. In this case $225k is above the $200k they set as a cap. "Your Fired" Just joking. No comb overs here.

In todays market if someone tell me they can only afford $200,000. I will show them a variety of homes between $180,000 and $225,000. The sad fact of the currant market is the $225,ooo is probably going to sell just over two. Also if you show alot of homes in their target market and they haven,t liked any you might by then have figured out what they are really looking for . And if you can find one that is just a little bit of a stretch say $210,000 it might be just the thing to make them happy. Especially if it was origanlly listed at 225,000 or 230,000.

Hugh, I think most people would be ok with that. But I guess the question is would stretching them to $210k be predatory?

AUG

2007

the approval letter should state 200 k if that what they can do not 250 k then they can look in the 180 range and if they don't like what they see they can 1 go try to find it themselves or 2 be satisfied with whats available at 200k sounds like these people need to get real and quit wasting the Realtors time.

As to who is predatory if they can only do 200 why is it for 250? I think that says it all could I have misread the post I don't know I read it 3 times still think I am missing something. Sorry I am a little slow thinking today

AUG

2007

Margaret, Please go and talk to your favorite lender so that they can help you understand a situation where a buyer has a pre-approval letter for more than know they can afford.

FYI this is a public post. Hopefully none of your customers read this.

MAY

2008

I guess everybody wants to get paid.

NOV

DEC

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