Do I Really Have to Use the Seller’s Lender?

Real Estate Agent with RE/MAX Home Realty 0225180815


I saw this Blog Post and it speaks my sentiments exactly.  This is very unethical of the Sellers to say such things to potential buyers to try to Force their business into their own lender's hands. 

Most of my clients that I have, I have had them working with my lender to get their credit scores up so they can qualify to buy.  This sometimes takes 1 year to get them to this place, and then for this to happen after them working with 1 lender for 1 year, is very unfair practice.  I wish someone would publish an official ruling on this practice being unethical and banning lenders and Realtors from publishing such biased and prejudiced statements as this in the future. 

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I had prequalified a couple, move down buyers, and they had been busily shopping with their agent.  Out of the blue, I got this message from them:

"We have decided to buy a subdivision home and will be compelled to use the in-house lender."

In California, does a buyer actually have to use a certain lender just because the seller says so?  Short answer-no.

Subdivision agents commonly use this ploy.  They will tell you that your offer cannot be submitted unless you first get prequalified with their approved lender.  Or that certain sales incentives (like cash for closing costs or property upgrades) will be offered only if their select lender is used.  While this is commonplace, it is NOT legal or ethical.

Similar ploys are used on buyers who want to offer on bank owned homes.  You may be told that, not only do you have to get prequalified with a certain lender, but that you also need to submit personal financial information in order to be prequalified.  That's not legal either.

So what can you do if you find yourself if one of these situations and want to use your own mortgage source?  First, make sure you have an agent that it is not the listing agent.  Even on a subdivision purchase, get your own agent. They will work on your behalf to push back against the ploys.  If the seller won't back down, move on to another property.  Your mortgage could be with you for a long time; you deserve to get it through a source you choose.



"Honest Ed" Gillespie
Residential Lending for All of California

(916) 849-9200

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Content in this blog is original to Ed Gillespie and does not reflect the views of First Priority Financial. 

Copyright © 2010 by Ed Gillespie |  DRE#0142603, NMLS #224226 |  All rights reserved.

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Curt Baumgarth
Century 21 All Stars - Mesa, AZ
CDPE Realtor Serving the Valley of the Sun. 480 26

I completely agree.  If Ed is correct that this is not legal, what is our recourse?  I'm sure its a state by state basis.

Dec 26, 2010 05:06 AM #1
J. A. Michail
Real Property Management of Sarasota & Manatee - Sarasota, FL
Real Property Management of Sarasota & M

Renee:  I work mostly short sale listings, so before pulling a property off the market for what could possibly be a six month negotiation, I have to be ABSOLUTELY CERTAIN that the buyer really is qualified to buy.

I require ALL prospective buyers to get pre-approved by my "designated pre-qualification lender," not because they have to actually use him to get their loan, nor do I even care who they use to get their loan, but the only way I can know for sure if a buyer is truly qualified is if I hear it from a lender with whom I have gained trust through experience.

I explain this to buyers' agents up front and by and large they agree and understand.  Sometimes the buyers get the loan through "my guy" and sometimes they don't -- that really isn't my concern.

Incidentally, the lender is more than happy to have a shot at getting the loan and they know exactly what the situation is going in -- they know I tell prospective buyers up front that they can use whomever they like and should only go with someone they are comfortable with -- my pre-qualification mandate is just that, and nothing more.

Bottom line, while it's ILLEGAL to mandate that the buyer only get their loan from a particular lender, it is PERFECTLY LEGAL for a listing agent to insist that a pre-qualification be done by someone they know and trust trust (which by extension really means, "By someone the seller knows and trusts").

As a listing agent, my sellers expect me to "watch their back," and especially in a short sale situation, we cannot afford to be anything less than certain with respect to buyer qualification.

Make sense? -- JM

Dec 26, 2010 05:11 AM #2
Gary Pike
Better Homes and Gardens Real Estate Metro Brokers - Powder Springs, GA

I agree with JM, I do have the right to act for my clients best interest and ask that the buyer pre-qualify with a Lender I am familiar with, as long as they understand that they are not being forced to use them.  If their are agents or Lender/Owners requiring that they use a specific Lender I would tell my buyer to walk away.

Dec 26, 2010 05:48 AM #3
Ed Gillespie
Rocklin, CA

Thanks for the re-post!

Dec 28, 2010 05:05 AM #5
Mitch Muller - Charlotte NC Real Estate
ProStead Realty Charlotte, NC CRS CDPE - Charlotte, NC
Certified Residential Specialist

JM, I see both sides of this and agree with you in the fact I do a lot of short sales as well and do the same thing you do. I have been told, albeit not researched to confirm, this has been challenged in some courts and determined to be illegal and unethical. I'm sure we will see some legislation coming down the pipe on this, but in the interim, if a buyer agent or client objects to this, I will step out of the way if it's a reputable lender, so not to cause my client a sell!

Mar 29, 2011 10:19 AM #6
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Renee Daniels

"Neighborhood Realtor" Serving Prince William Coun
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