This is a unbelievable issue; the New York Times has recently report that some New York Real Estate sellers are requiring Real Estate buyers to be pre-approved by the sellers approved lender Source: “The Seller Chooses a Lender,” The New York Times (April 25, 2013). Now, this is not saying that the buyer is required to actually use that lender for their mortgages. But just be pre-approved by their there lender, to make sure that the person can obtain a mortgage, and if all else fails with the lender the buyer uses, they would have a fall back plan to make the purchase process smoothly. Now even though this report is of the New York Real Estate Market; however, I have already have seen this happen in the Massachusetts Real Estate market. Which means this problem is becoming widely accepted quickly.
Now you might be asking, “Scott, why is this such an issue?” With the current tough bank requirements for borrowers, which includes credit rating, every time a lender does a pre-approval for a potential borrower, it effects that persons credit. Maybe it could be a small hit or a large hit to a person’s credit, but a fraction of a point on a credit rating could effect a person’s chances of getting their mortgage. So, I don’t believe that a seller should be allowed to require this and risk a buyer’s chances of obtaining a mortgage. Furthermore, every buyer is required to have a proof of fund which needs to be submitted with any offer. This proof of funds could be a bank statement that shows that the buyer has the money to purchase a Real Estate property in cash or a pre-approval letter from a bank who has already done the pre-approval process and says that that buyer is qualified for a mortgage. And the redundancy of the process could affect the buyers original bank approval.
Therefore, I think that this requirement is very risky to home buyers and the recovery of the Real Estate market and should be looked into by the Real Estate community at large.
(Source: “The Seller Chooses a Lender,” The New York Times (April 25, 2013), http://www.nytimes.com/2013/04/28/realestate/the-seller-chooses-a-lender.html?_r=0, or facebook.com/Scottremaxbrookline )