BUYERS, DON'T BOTHER PREQUALIFYING WITH "YOUR" LENDER ~ BECAUSE MANY LISTING AGENTS ARE DEMANDING YOU USE THEIR LENDER. OR "THEM"

The Realtor must not do much business as a lender.

If he did, I couldn't see why he would upset his biggest referral source, real estate agents, by competing with them!

Hi Kat, may I inject another side on this subject?  Your points are very very valid and I have to just hope that the type of pre-qualifing you described isn't the norm of what is going on. 

Here's another side to consider.  With all the online lenders available we have found that it's very easy for a buyer to produce a pre-qual/pre-approval letter.  AND we have been burned.  Usually it's by a company we don't know them, nor are they even in our local.  It's happened that take the property off the market as pending, taking at face value these buyers are good to go as their prequal letter advised.  But then the cards come tumbling down.  Weeks later, maybe even a month of being off the market we start to sense this buyer isn't going to get their approval. 

So we'll put that financial requirement on our lisitings and it'll read; Buyer MUST be pre-approved with  such and such bank - our inhouse lenders name  919 000-0000, but may close with any lender.

It's not our attempt to steer anyone - it's our only defense and protection for our seller.  Is there another way to avoid getting burned by not so valid approvals?

Kat,

After the pre-qualification with "their" lender, are your buyers free to choose whoever they want?

Rich

Kat - YOU GO GIRL!  Oh don't even get me started on this sleazy practice.  For those of us in the mortgage biz, we've been dealing with these snakes for quite some time.  While these sleazy banks will tell you that these practices are a means to insure the prospective buyer is truly qualified, we (other lenders) all know that these practices are simply marketing ploys to abscond with other lenders qualified buyers.

Recently, a client of mine (who was referred by a friend and I had spent approx. four months working with) was asked to pre-approve with this big, national bank.  Since my client is a very busy person, he asked me to take care of it for him.  When I contacted the "preferred" bank rep and explained who I was and what I was calling for, they immediately refused to speak with me and told me they only speak with buyers.  I relayed the message to my client.

My client was annoyed but called anyway because he wanted the property.  My client had to go thru the same process I put him through, he had to have his credit pulled again and the rep nagged him throughout the whole pre-approval process about going with her and the "preferred" bank.  On numerous occassions, my client told the rep he had no interest in changing lenders.

At this point, the bank rep insinuated that my client had a better chance of getting his offer accepted if he went with her instead of me, which infuriated my client to the point that he told her he would let his Realtor know that because he was sure that his Realtor, who also sits on the MLS board, would be very interested in hearing that.

Needless to say, my clients offer was accepted and throughout the entire escrow, this bank rep continued to call my client in an effort to get the loan, right up to the day we ordered docs.  CAN WE ALL SAY WTF?

Kat - In retrospect, I should have reported her then too but I didn't want to jeopardize my clients chance of not getting his offer accepted.  This guy had been looking for months and had already had several of his offers beaten out by other offers.

This particular time though he was best and highest and got the property regardless of what the "preferred" bank rep said.  Personally, I told him that she was just saying that in hopes to scare him into going with her.  PATHETIC!

Kat - I often shake my head at some of the events and practices going on in our industry, that we wouldn't have dreamed of a few years back.  It's just as Donna says, "PATHETIC!"

Kat,

I agree this practice is smelly! But you don't have to use their lender, just agree to be prequalified by them!!! Insist, on behalf of the consumer you represent, that the ultimate lender is one your consumer has chosen...!!! Thanks,   Fran

That's a bunch of BS. I don't approve of any who wear many hats or the companies that have escrow, lender and real estate co all in one either. CONFLICT OF INTEREST. That's a big one for me and I have NO problem spewing about that either.

Kat, Being in that same market of Southern California, I agree that this practice is bad (for the most part).  But I know have a different take on it.  I have a new listing - people were in escrow with their previous listing agent. The buyers had a pre-approval from a fly-by-night lender -which ended up being meaningless.  Eventually the transaction was cancelled because these people could not get a loan.  Now I have the listing.  The sellers are so afraid of that happening again.  We are asking that any buyers with a pre-approval from a lender that is not recognized be cross qualified with the loan person I trust.  This is like insurance for my sellers.  A pre-approval from a major lender likes Wells Fargo, or BofA won't need that cross qualification.  And we aren't trying to steer business away from anyone's lender.  In this type of situation, what do you think of asking for a cross qualification?  I'd love to hear your opinion.

There is an upside to this, if you think about it. We see this all the time in Sacramento. Primarily, the listing agent (and sometimes the seller cares, too) wants to know that the buyer is truly qualified. There are those back-burner agents-slash-mortgage brokers who sometimes issue prequal letters for buyers that are bogus. Then the seller has sat in escrow for 3 to 4 weeks before anybody discovers that the buyer's lender can't perform because the buyer wasn't properly qualified. It happens more often than I'd like to think.

The lender does not demand that the buyer get the loan through that lender. The buyer is still free to choose his or her own lender. But the upside, I'm getting to this, is the fact that in Sacramento, almost every desirable listing is receiving multiple offers. On top of this, the poor mortgage rep who has to prequalify all these buyers realizes that only one buyer will win the offer, and that buyer may not use that mortgage rep for the loan, so all the work that rep has done is in vain.

OK, OK, so the upside, the upside is the mortgage rep KNOWS how much all those other buyers are offering for THAT HOME. This is where you can find out, if you do it properly, the amount a buyer is bidding against, if you get my drift.