My head in spinning! Can someone please explain?

Real Estate Broker/Owner with EverSand Realty Group



Because I just suddenly see things happen without researching the WHYs and HOWs ..........Mostly because I'm just busy carrying on business and don't stop often enough to investigate the changes, here is something I thought you can all explain to me.

Years ago (and still to this day) we, as Realtors, learned that "steering" is not a practice we would want to take on.........we could lose our licenses, and worse, not be looking out for the BEST interest of our clients.

That being said......WHY do I suddenly notice with a LOT of listings the phrase "INTERESTED BUYERS MUST BE PRE APPROVED BY XYZ Mortgage company (BANK).  Now I'm not referring to only foreclosure properties, because that I can understand if that particular bank owns the property.  But, it appears that everyone is doing it now.  It's obvious to me (and I'm sure to the public and real estate commission) that these real estate agents have some kind of relationship to this mortgage company or bank.  Take certain Big name RE companies.........they even have their own (with the same name) Loan officers sitting there.

Recently, I had a buyer who wanted to put an offer on a house and who's credit, income, etc. was very good.  They had done their own shopping for a mortgage and had settled on who they liked the best.  They had a pre-approval (actually is was an actual approval - subject to appraisal).  The listing agent told me that she would advise her seller's not to consider the offer without HER mortgage guy speaking to the buyers and running his own check on them.  My buyer's refused to talk to him and were very mad about the way this was taking place.

I told the agent that because she was insisting on this, I wanted to meet and present the offer myself to her sellers (which she was not in favor of, and said that her seller's didn't want that).  I told her that her seller's needed to be aware of the fact that my buyers are ready to move on to another house because of her insistence of forcing them to talk to her mortgage company.  Since the buyer's were offering close to list price on a house that has been on the market for so long, AND were "financially" excellent buyers, with approval in hand..................she (and her companies policies) were not acting in the best interest of the sellers.  

Her manager called me and told me that it was something that all their seller's felt good and secure about......making sure the prospective buyer was qualified by their XYZ mortgage company.  And that because my buyer's were refusing to participate it sends up a red flag.  I explained all of this to my buyer's and they said "They just want to see if they can swing us to their mortgage company.  We have an approval, and they can call and verify with our current loan officer, anything they want to find out (even see a copy of our credit report).

At this point, the buyer's had become so mad about this, they decided to look elsewhere for a house.  A week later the agent called me and said "OK, I'm sure my homeowners would accept the offer"........and I said "Too late"!! 

I am well aware (as with my own listings) that we all want to MAKE SURE that a buyer with an offer is well only makes sense in servicing our Sellers properly.  However, where do you draw the line.  And when is it obvious to the Real Estate Commission that this IS NOT the only reason some companies PUSH their own mortgage reps.

It appears that everytime a rule or law is put in place, everyone finds a way "around" it.  I don't want to hear complaints about this from people who do this, I'm aware of why it is done (various reasons). I myself, when asked, give 4 names of banks/mortgage companies that I think do a GOOD job for the comsumer.  I just get angry when it is thrust upon us in a forcefull way and we end up losing sales because of it.

Someone please explain how this has become SO OUT OF HAND!!  What ever happened to the obvious "STEERING" rules?

Posted by

Sandra Nixon

EverSand Realty Group



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Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

I'm not certain I see it as steering, especially given the definition above.

This is seen most commonly with the REOs wanting buyers to be pre-approved by one of their loan officers.

I know that I usually like to see a DU (desktop underwriting) approval on a buyer before my sellers accept.  It just gives me more confidence in their ability to close.

Jun 13, 2009 03:59 PM #26
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

I have only seen this with foreclosures, and that is bad enough.

Jun 13, 2009 04:48 PM #27
Kristin Moran
Owner - RE/MAX Access - - San Antonio, TX
San Antonio,TX - Real Estate - 210-313-7397

I have seen this & dealt with this also.  I don't get it.  Seems they want you to be comfortable w/that mtg company & be lazy & say "oh, well they already have everythign started".  I think not.

Jun 13, 2009 05:54 PM #28
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

Steering my not be the proper term used when someone pushes their services as a condition for a contract . .normally steering is defined as the illegal practice of real estate agents only showing certain ethnic groups properties located in specific ethnic areas. . and it has been in place to protect the public. In this case ,as much as you are concerned with all of us, should write to the NAR and complain. . . we have to wake them up first. . they have seemed to be asleep for the last two years and only act (luke warm action)upon strong requests from us.

Jun 13, 2009 10:42 PM #29
Tim Fennell
The Legends of Real Estate, REALTORS® - Jacksonville, FL
Jacksonville Real Estate

Technically, this is not steering.  The technical term for this practice is STUPID.  LOL

Seriously, what rational seller in today's market would refuse to entertain an offer on the basis of which lender has preapproved the buyer?  We all know that the preapproval process is weak anyway.  A preapproval is a starting point but it is not a guaranty.  If a reputable lender (whatever the hell that is today??) has preapproved a buyer then, by all means... bring us the offer!

We are working in a very different market climate now but, unfortunately for sellers, our practices haven't changed very much to meet the demands of the chaning climate.


Jun 13, 2009 11:55 PM #30
Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

This is just another strange thing we have to worry about, right?  Thanks for the great post!

Jun 14, 2009 12:26 AM #31
Ron Parise - Cape Coral, FL

As has already been pointed out...this is not steering ie the illegal funneling of home buyers to a particular area based on the desire to keep the makeup of that neighborhood the same or intentionally change it.

If it was the seller that made this rule than its ok...but I doubt that that's the case. More than likely it's what you and your client suspect, an attempt to direct business to a particular lender. Which is at best just plain dumb and at worst a violation of RESPA. In either case not, as you say, acting in the best interest of the seller.  

Im glad you were able to find another suitable house for your client


Jun 14, 2009 02:18 AM #32
Sandra Nixon
EverSand Realty Group - Middletown, NJ

For those who feel it is not steering, whether it fits the "written" description or not, COMMON SENSE - it is steering when looked at ETHICALLY.  In this particular case, the Seller's representative was offered the option of calling the buyer's loan officer to verify everything and even get a copy of their credit report.  As stated, these particular buyer's had an "actual" approval - condition upon appraisal.   There was no reason to INSIST they speak to XYZ company......there was other steps offered to verify their ability to obtain the mortgage.

I truely believe (because I've been in the business for over 18 years and know various agents who have worked for that company) that the agents there are forced to PUSH this issue.  If they don't they will be questioned as to WHY their loan officers were not able to make contact with the buyer..........and probably repremanded as to WHY they did not push the issue.

Last, but not least, for those who believe it is not unethical............IT IS AN OBVIOUS "LEAD GENERATOR" FOR THE MORTGAGE COMPANY.  Once that buyer speaks to that mortgage company they will be told "I can give you a better rate, or less closing costs, or no app. fee".   And then the buyer, will think "OK you already have all my info, why not go with the better rate".  We all know that when you speak to a prospective buyer or seller you always try to win them over the competition.   It's blatently a LEAD GENERATOR for that company, especially when that agent's company name is the same as the mortgage company's name...............the owner found his way around the laws and makes it look like they are looking out for the good of their seller's..........when an "IDIOT" can see what's going on.........then why can't the NAR or real estate commission......?

What ever happened to "WE MUST SUBMIT AT LEAST 3 NAMES WHEN ASKED FOR RECOMMENDATIONS".  We never force someone to use or even speak to ANY specific lawyer, inspector, mortgage company. 

No, I'm not willing to file a complaint because my buyer's found another home and closed........AND this practice is so rampant and obviously allowed by our authorities that I'm sure they have some WAY AROUND the rules, or it wouldn't be able to exist.  I'm thinking that maybe their way around it is that they do not represent the party being forced to speak to that mortgage company, therefore they can not be accused of steering.

Here's an idea - why doesn't the RE commission look at the files of this RE company and see HOW MANY listings were sold where the buyers USED their mortgage company.  I'll bet the numbers would be an "eye opener".

Jun 14, 2009 02:28 AM #33
Glenn S. Phillips
Lake Homes Realty - Birmingham, AL
CEO, Lake Homes Realty /

This approach may be convenient but when applied without exception it puts the listing agent and broker in a position in which they are not necessarily working for the best interest of their client... the seller.  Period.

When the mortgage company (which did a great sales job and does make it easier for the listing agent) is more important to the opportunity for an offer than the seller or the buyer, that is a problem.  

And that is what this situation has created.

Jun 14, 2009 03:02 AM #34
Maureen Megowan
Remax Estate Properties - - Palos Verdes Estates, CA
Palos Verdes Real Estate Blog

I don't blame the listing agent from wanting to have buyers prequalified with one mortgage broker, but I can't believe that she lost a potential sale by not being a little flexible, especially since the buyers had a loan commitment, and not just a prequalification letter. . I often question the value of a buyer submitting a prequalification letter as many loan brokers will issue these without a lot of investigation.

Jun 14, 2009 06:34 AM #35
Patricia Aulson
Realtor - Portsmouth NH Homes-Hampton NH Homes

I too agree with the above comment by Maureen.  She shot herself in the foot, so to speak.

Patricia Aulson/portsmouth nh real estate

Jun 14, 2009 07:21 AM #36
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

It sounds like the listing agent could use a lesson in diplomacy. It was probably one of the key points the agent used to get the listing - since we do have closings fall apart at the last minute. But if their approval was from a reputable lender and they were putting a good amount of money down, she could have counseled her sellers to make an exception, IMO.


Jun 14, 2009 08:05 AM #37
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

THere is a company here doing the same thing, with many of their listing agents requiring their in-house lender to screen buyers. I too find this insulting.

As a buyer's agent, I do my job. I also do not waste my time on not qualified buyers. I am too busy for that.

It seems to be another element of control that they wish to exercise.

Jun 14, 2009 08:18 AM #38
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

PS--I wonder if the seller truly knew you had a preapproved buyer ready to make an offer. Did the agent even approach the seller with this? I would doubt it.

Jun 14, 2009 08:18 AM #39
Elaine Sisman
The Keyes Company Realtors - Miami Beach, FL
"A Realtor you can Trust"

Unfort., I do not think most 'pre-qual' letters hold much weight. Reality is, I am seeing this more and more with short sales (kind of opportunistic if you think about it), and with REO's. Bank-owned I do understand a little better they are generally looking to expedite and it does. 

Call the listing agent first. Sometimes you discover the nature of the relationship between that Brokerage & Mortgage Co., and are able to negotiate a comparable Lender. Other times it is really up to you to present it in the right light to your client. In the spirit of all working together to the common goal of getting to closing. Remind them just because they cooperated and got the Pre-Qual from a certain place does not obligate them to go forward giving them that business.

That's really it. You are cooperating in order to get an opportunity and price we otherwise could not.

Jun 14, 2009 10:23 AM #40
William James Walton Sr.
WEICHERT, REALTORS® - Briotti Group - Waterbury, CT
Greater Waterbury Real Estate

No, definitely not steering, either legally or ethically. There may be some other term that is more appropriate, but steering isn't it. But I would be more than a little put off by the scenario you described as well. Have you run this by your broker (or are you the broker)?

Jun 14, 2009 12:48 PM #41
Andrew Martin
REMAX Accord - San Ramon, CA

This is also one of the biggest hot buttons for me. In my area where there are many short sales, and REO's this idea of being pre-approved with every mortgage broker in town is nuts.

It may not be called steering, but how can I be FORCED to call a listing agent mortgage broker, have them run credit and do a pre-approval before I'm allowed to make an offer on a house. How many times do your clients want their credit run? Also, when I'm showing homes on weekends and we want to write an offer on a weekend, we can't because the damn mortgage broker can't be found on a weekend.

I personally think this practice has to stop. But, the new home builders do it all the time, and they even will give a client money if they use their lender. Can I as an agent do that? Bribe people to use my favorite lender or title agent.

This is a very current practice in my market that is getting way carried away.

Jun 14, 2009 04:21 PM #42
Terry Osburn
BHHS|Drysdale Properties - Pleasant Hill, CA
Broker Associate

Well I don't know what is happening in your particular area but I can tell you we still have bogus pre approval leters given out and it costs time and money. It really is unfortunate.  Due to a a recent experience I just had as a listing agent when we were near closing and all of the suddden the pre approval letter that was signed by underwriter did not mean a hill of beans quickly made me a believer in buyers being prequalified with a direct lender and not some so and so company.

Thinking there was a mistake had the buyer agent take her buyer to   another loan officer and she called me direct and stated "I really do not know how this buyer EVER got pre approved. He is not even pre qualified to purchase"....

I realize there will always be those abusing such but I can tell you firsthand we have seen several bogus pre approval letters in our area.  My feeling is the listing agents should just state a buyer must be pre approved by a direct lender or bank and not a provider of the listing agent choosing.

It is a catch 22 but we have seen one escrow after another fall out due to the bogus pre approval letters handed out. That costs more time and money. In short sales especially if the insertion of another buyer causes the file to be shut and reopened and reassigned to another negotiator. In case you wondering which lender does notorious of not allowing other buyers be inserted without going thru at least 2 stages again....

Jun 14, 2009 05:43 PM #43
Michelle Gibson
Hansen Real Estate Group Inc. - Wellington, FL

I've been in this situation before and I requested that the seller sign a statement stating that they will only consider offers pre-approved through XYZ mortgage comany and not any other qualified lenders. 

Even if the seller agreed with their listing agents suggestion of having all buyer's pre-approved through XYZ mortgage company forcing the seller to put it into writing may snap them back into reality and make them question why am I potentially turning away a qualified buyer?  I told the listing agent to have the sellers put this statement on the offer and have the them initial it.  This way the seller sees the offer, which once again may snap them back into reality, espeically if it's close to their asking price. 

Needless to say the listing agent refused to have the seller sign or initial anything, I wonder why?, which sent up red flags for my clients and they decided to move on.  They questioned if it's this difficult to make an offer how difficult is it going to be to negotiate? to have repairs fixed? to schedule the appraisal? to schedule the inspections? etc.


Jun 15, 2009 02:30 AM #44
Robert Thomas

Mandating that potential buyers disclose any personal information at all to the mortgage company of the listing agent is steering.  Perhaps a bit different than the original terminology, but just as predatory lending has evolved, so too has the steering.  In-house mortgage employees are normally less experienced than other mortgage loan officers, which is why they work in a position that requires the leads to be walked to their desk.  It also does not benefit the consumer as the pricing is often higher than other local independent lenders because of the operating costs, salaries, benefits and the level of profit expected for this "hand delivered" leads.  Years ago the large real estate offices would not even allow loan officers to enter their buildings.  Then they simply threw away the cards and the information, totally ignoring their obligation to benefit and service their client.  With the pre-approval process so important in this housing market, and consumers doing their home work and choosing a lender that can work with them and provide them with honest and accurate information for months before they start searching for a home, it is sad that the real estate mortgage companies have come up with yet another way to benefit their bottom line at the expense of the consumer.

Jul 20, 2009 05:26 AM #45
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