Mr. Seller - you want me to use your lender. Really!

Real Estate Broker/Owner with Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento

Mr. Seller - you want me to use your lender.  Really!


I don't know about every other buyer and their Realtor hunting for homes today, but there has certainly been a surge in the listing side of a transaction requiring a buyer to qualify through the seller's designated lender.    Now we understand the big banks, BofA, WFB, all directing approvals to be considered on their REO offers.    Do not like it, but we do it.   Since those companies control a large portion of REO's, it's a good chance the letter can be used on a subsequent offer.

But... there has been a trend on flip properties and now this week, a single traditional seller requiring "buyer must be pre-approved through Mr. Lender at  ABC Mortgage".   Really?   It's fairly clear that the flip properties probably have an additional relationship with the lender.  But why on earth would an individual seller make this requirement.      

Our Sacramento market has changed into a very competitive market with low inventory and buyer's need to be nimble and ready to write that offer and perform quickly.  The process of pre-qualification is to insure the buyer's ability to close on a transaction.  it takes work and effort.  If they are already pre-qualified through their mortgage banker of choice and a big bank lender, they are prepared.  What else could the seller's lender possibly do to add to the approval that has not already been done.    I do not see where another approval helps the transaction AND having multiple lenders run multiple credit reports is not in the best interest of the buying public.

I am not a fan of seller directed pre-approvals, but with the big boys, it makes some sense.    But for this requirement to trickle down to average, traditional seller - seems a bit too far.   Buyers & Seller's, please make sure you agent explains fully the merits of this process before you proceed with one more pre-qual.


Comments (21)

Ron Tiller
Star Referral - Grand rapids MI - Grand Rapids, MI

I'm betting that Mr Lender at ABC is the seller's close relative. Still silly and, obviously, listed by a weak agent. 

Mar 17, 2012 02:32 AM
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate
Hi Cathy - We've seen this a couple of times when we made offers, and both times we ignored it, submitted our buyer's lender's preapproval and never had it mentioned - it fell into the "nice try" category.
Mar 17, 2012 02:34 AM
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Kathryn:  Sacramento has changed dramatically in the last 90 days.  Very low inventory and lots of buyers finally coming into the market.  This is just a layer of complication that I do not believe helps the market.


Ron:  I agree, it is silly.  The down side is that in our multiple offer market, it is possible a buyer's offer may not be considered for that detail.   At that point, the requirement is a detriment, both to the offer and the buyer.

Mar 17, 2012 02:38 AM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

Cathy,  The reason a traditional equity seller may require approval through their lender is really no different than a short sale or REO.  The bottom line is ... far too many agents are working with buyers who are not actually approved. They carry a piece of paper that says they are approved however the approval is not worth the paper it is written on. 

Sellers want to know the buyer can close.  The process, if handled correctly, would not require another credit pull. The buyer's lender simply provides a copy of the credit report to the seller's lender.  The same would apply for verification of application and supporting docs.  It can be as simple as a lender to lender conversation and validation of documents.  If all parties are fully cooperating with the process, it can be completed in 1-2 hours! 

Mar 17, 2012 02:39 AM
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Hi Dick:  I have been watching a marked increase in this trend.  The individual seller this morning was a new one and evidence that it has gone to far.  For the newby agent, they could harm the buyer's credit in the effort to get the offer accepted.

Mar 17, 2012 02:40 AM
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Kathleen:  So True.  And that is exactly what we do, particularly with the big banks.   Additionally, we make calls ourselves on letters where we do not know the lender or the agent - particulary out of town buyers.    If we know the agent and the lender,  we consider that sufficient for presentation.     It is the introduction of the requirement at this new level I take issue with. 

Mar 17, 2012 02:45 AM
Anna Banana Kruchten CRS, CRB, Phoenix Broker
HomeSmart Real Estate BR030809000 - Phoenix, AZ

Cathy I have real issues with this has well with flips....and our buyers that are always well qualified really have issues with this, some will not even bother to look at the homes. Sometimes we work around it after a conversation or two.  Also I'd like to see this challenged at a local level - which I've been hearing might happen. 


Featured in BananaTude

Mar 17, 2012 03:48 AM
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Anna:  I would so love to see this challenged.    I can understand the seller side stipulating services that are part of the closing process and conclude at closing, but take issue with mandating services that continue beyond the closing process.  Homewarranty, Insurance, and now the new loans?    Yes... buyer you can have this house but you must take all my suppliers with you.    Buyers should have choices and for all the new disclosure requirements, this issue has not been address.  

And.... thank you for the feature.  I appreciate it very much!

Mar 17, 2012 04:21 AM
Doug Bullwinkel
Envoy Mortgage,NMLS ID 6666 - Roseville, CA
Mortgage Loan Originator NMLS #281609

I agree with Kathleen as there are far too many pre-qualification and approval letters floating around out there that have little or no validity.  Any seller, when accepting an offer just wants to know that they have a legitimate buyer that has pre-arranged financing.  I get calls every week from buyers and Realtors that thought they had a loan approval and then found otherwise.  In most cases, simple communication between lenders can confirm you have an approved buyer without the need for additional credit reports and loan applications. 

Mar 17, 2012 08:36 AM
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

I'm even against seller directed pre-quals with the bank owned homes.  I often wonder if they are trying to find out how high someone can go.  It never feels just right.

Mar 17, 2012 08:51 AM
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Hi Doug,   You are correct, we have always tried to work around that solution by having our lender of choice communicate with the designated lender and that can work very well.  I think the requirement, while possibly best intentioned is a slippery slope.  For liability reasons, we Realtors, have always been advised to tread carefully when providing names of service providers only for some listings to jump in and make a specific requirement for the biggest referral in the entire process.  I just don't see how we can have it both ways.    

Mar 17, 2012 09:18 AM
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Chris Ann:  Have thought that myself.  The only silver lining in the big guys is that the approval is sometimes helpful on a subsequent offer.

Mar 17, 2012 09:19 AM
Kathy Sheehan
Bay Equity, LLC 770-634-4021 - Atlanta, GA
Senior Loan Officer

I agree with Chris (#11) and most of my clients feel the same way.

Mar 18, 2012 12:57 AM
Marge Piwowarski
Phoenix AZ Horse Property - Phoenix, AZ
Phoenix AZ Horse Property, LLC

So far, I have not had a client willing to look at a home where the equity seller or flipper made that requirement.  I feel they are way out of line and as long as there are other homes to look at, they can keep theirs.  If there are no other homes available, I would submit our prequal and ask them to take it up with our lender if they had questions.  I don't waste time showing homes to the unqualified....

Mar 18, 2012 07:45 AM
Charita Cadenhead
eXp Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

In a traditional sale, I'm willing to bet that the listing agent pushes that button for the seller to require a specific lender.  It's my guess that the seller would othewise never even think to do that.

Recently I did have an investor require a buyer to select a local lender. The buyer didn't do it and the seller/investor wasn't worried because their houses sell like hotcakes.

When working with buyers, I may strongly suggest working with particular lenders but I certainly don't demand it. And it drives me crazy when sellers demand it (even though I understand the reasoning).

Mar 19, 2012 08:42 PM
Doug Rogers
Bayou Properties - Alexandria, LA
Your Alexandria Louisiana Agent

I wonder how long before this gets challenged in court. Can the seller prove that ABC mortgage broker is more sound than Big Local Bank?

Apr 11, 2012 12:06 AM
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

Perhaps the listing agent is as sick as I am of so-called preapproval letters being bogus. Some mortgage brokers print them out faster than you can say FICO score without even running a credit report. I know this because I ask for DUs on many of my listings. I go one step further.

When you get frustrated enough going all the way to underwriting over and over with files that never should have been approved in the first place, you, too, will ask for a separate preapproval from a trusted source.

Apr 12, 2012 12:49 AM
Bob & Leilani Souza
Souza Realty 916.408.5500 - Roseville, CA
Greater Sacramento Area Homes, Land & Investments

Just wanted to stop by and let you know about an upcoming AR MeetUp in Roseville:

Sacramento Area ActiveRain MeetUp #3 - Roseville, CA - Friday, 4/20/12 (3pm)


Apr 14, 2012 03:57 PM
John McCormack, CRS
Albuquerque Homes Realty - Albuquerque, NM
Honesty, Integrity, Results, Experienced. HIRE Me!
Good evening Cathy It's been 5 months so it was great to see you in the Rsin today! Glad you're doing well and we're looking forward to seeing you back on a regular basis! John
Aug 09, 2012 02:04 PM
Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

I can see that happening, as long as the seller doesn't dictate that the loan be made by the seller's lender. That, as far as I know, is against the law in California and Hawaii and probably most other states.

Dec 19, 2015 02:50 AM

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