It is true! Right here in the USA. Land of consumer rights and fair trade. In the midst of what is being called a "Buyers Market". A travesty is unfolding. A little dramatic? Not really...
We are watching an increase in two unlawful real-estate practices from sellers and their realtors. And while this may be happening in other states like as well, it is happening to our friends and neighbors and someone has to speak out. If it has to cost me business from realtors, than so be it. Here is what is happening:
1. Some Real estate sellers and their realtors are insisting that buyers be pre-qualified and/or pre-approved through the seller's lender (or the seller who is also a lender) before allowing an offer to buy to be made.
2. Some Realtor's are asking for buyers' credit scores to give to the seller with the offer to buy and a pre-qualification letter.
At first glance, you may think; so what? The seller/lender does not want to go out on a limb in these troubled times while trying to sell their property or REO/foreclosed property. (REO is the industry term for lender owned property).
But a closer look at our right to negotiate a fair price and the laws of privacy are at serious risk here. Federal laws are being disregarded and people are being taken unfair advantage of.
First consider that in any negotiation, like in the game of poker, not showing your cards to the other players is crucial. If the seller knows you can afford more, they will want more. So a seller who ordinarily might have accepted a lower offer ... is not as likely to do so if they believe you have more to give. Once there is a breach in confidentially, the buyer's negotiation process is compromised. That's they simple truth.
The more complex truth is that the buyer could stand to loose substantially more money in this scenario. The extra credit check to pre-qualify with the seller's lender could lower the buyer's score, which in it self could lose the buyer's ability to get a mortgage or a better rate with a competing lender. Auto and Home-owners insurance is impacted by credit scores as well, and could have some financial consequences for the buyer's new homeowner's insurance costs.
This in part is why there are two laws protecting your right not to disclose your credit score and other non-public information. First the Gramm-Leach-Bliley Act (GLB ) -- Protection of nonpublic personal information (http://www.ftc.gov/privacy/glbact/glbsub1.htm ) - protects your right to privacy of this information.
Second ... apparently the first one wasn't specific enough, the FCRA or Fair Credit Reporting Act http://www.ftc.gov/os/statutes/fcrajump.shtm) promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.
Both of these acts are under the FTC (that's short for FEDERAL Trade Commission). So make no mistake that they are serious and very real. While no one is stopping a seller and their realtor from asking for your credit score, you as a buyer need to know, by law, you do not have to give it.
YOU do not have to provide the seller/lender, private seller, or realtor (not even your mother) with your credit score. GLB made this a privacy issue and FCRA made it clear that NO part of the credit report including the credit score can disclosed by your mortgage originator. The lender YOU choose needs that information to determine the Pre-Qual and Approval for the loan YOU choose, period.
Not only does the law not stop these unethical folks from asking for your score but realtor websites actually post; "it doesn't hurt to ask". BUYER BEWARE!!! It would be reckless for a buyer/negotiator to let the seller see how much they can afford to pay before the seller will look at an offer!!! It's like announcing to a sales person of a negotiable item: I have 100 dollars to spend on the 10 dollar item you are selling. Can you give it to me for 5 dollars?
While I know that I will not win many friends from the realtor community over this (many will defend the seller rather than buyer) that's OK! I have been defending buyer's rights for years now and that's not the way to win referrals from realtors! I do however have to ask one more question of the realtors who want to argue this with me:
What if sellers begin to say "offer will not be accepted unless buyer uses Linda's Realty Company"? Wouldn't there be a great chorus of disapproval from Realtors and their associations? And rightly so! So why is it that these conditions are being allowed under comments in the MLS?
Here's my best advice:
Borrowers: Don't give up your privacy rights or ability to negotiate fairly.
Realtors: Don't ask buyer's to comprise their rights for your seller.
Send hate mail or kudos to: buyeradvocate@mortgageadvisordirect.com
Linda Randall
Branch Manager / Vice President
Carteret Mortgage Corporation
21 Park St # 215
Attleboro MA 02703
508-222-5955
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