The 'Local Lender' Myth

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The 'Local Lender' Myth


Real estate is local!  Out of area lenders are terrible!  Online lenders are the worst! "______(insert lender/bank name here) stinks!".  These statements are thrown around pretty often in the real estate arena, and sadly, the perception is in some cases translated to reality.  Before I address these specific statements, a quick story:


Once upon a time, in a galaxy far, far away (specifically, the year 2007, in a small town called Chadds Ford, Pennsylvania) there was a lender who helped a home buyer purchase a new home.  Just prior to closing, the final documents were generated, and to the home buyers surprise, costs were over $7,000 higher than anticipated.  The home buyer was not happy.  Their real estate agent, whose happiness more or less coincides with the buyer's happiness, was aligned in their feelings.  The title company felt awkward.  The listing agent, upon finding out the transaction would still close, was indifferent to the matter.  What was very strange about this entire scenario, was that the home being purchased was very close to the lender's office.  This was a local lender (I know, you haven't been this shocked since you got the end of 'The Sixth Sense').  How Could This Happen!?.  Spoiler alert:  the lender was me.  I was 22 years old, working in a refinance-focused mortgage broker shop where I was the most experienced and knowledgeable person in the office (I'm including my manager, the guy who ran the office, into this equation) after 3 months of being there.  I did business 100% locally.  And I was terrible.  I was new to the industry, had 0 knowledge on much of anything, and I just graduated college and was living in a 100 square foot loft, often referred to as 'a bedroom in my parents house'.  I had never bought a home.  Our office had never done a purchase transaction.  How the hell was I supposed to know what a transfer tax was?  And why were so many months of taxes being collected at closing?   But least I was local!


There are stories like this all over the globe, happening every day!  That terrifying, scary bank/lender/broker that everyone says to be wary of, is very likely sitting within - *GASP* - a mile or two of several real estate offices with clients in need of home financing.  And they're the most local of local lenders to those offices!  Do you think they offer stellar service to the folks within that mile or two radius, and save their worst work for anyone 5 miles or further away?  Of course not.  Ok, well maybe things don't need to be that local.  But out of state lenders?  BUYER BEWARE!!   Can anyone tell me exactly how wide a state line is?  There was a time I lived in Newark, Delaware, and was a 5 minute drive from Pennsylvania, 10 minutes from Maryland, and 20 minutes from New Jersey.  So of course, I offered customers in Delaware great service, while all those other folks across that 'no go zone' suffered tremendously under my reign, because no way could an out of state lender do the same type of job they do locally.


I kid, of course.  Over 15 years later, sitting here as I type this in California, I can't help but laugh at how "local" is still considered some type of shiny, good word, while "online" and "out of state" are considered blasphemy.  The reality is, I can serve borrowers in Pennsylvania today better than I could when my ass was plopped in an office chair in Chadds Ford, PA.  I can serve Delaware borrowers today better than I could when I was living in Newark and Wilmington.  And I can serve borrowers in every other state in which I carry a license better than the vast majority of loan officers sitting within those state lines.  It's why my customer reviews are consistently 5/5 stars, and my most recent 10 transactions all had higher than 4.5 ratings in California, Utah, North Carolina, Georgia, and Pennsylvania - with the lowest score (which, oddly enough, is accompanied by really great feedback in the comments), being the transaction that occurred closest to home.

There are bad lenders & loan officers and there are good lenders & loan officers.  That's it.  A good loan officer knows how to do business in every state they're licensed - they know the details of transactions within the states, and the areas where things differ (ie attorney state VS title state VS escrow state).  They know the difference between 'wet' and 'dry' fundings, they know how transfer taxes differ, when real estate taxes are due (and how they're calculated at closing), and can set the right expectations with borrowers.  A lot of 'local' loan officers cannot say the same.  One of the biggest differentiators between good loan officers and bad loan officers, is that good loan officers don't have too big an ego to ask questions when they don't know the answers.  


To add another spin to help 'bust' these myths - on a recent transaction, a friend in a state I was recently licensed in (Utah) was buying a house.  Upon working with them, it was very evident that their real estate agent put it delicately...not great.  They knew it, but they had never bought a home before.  I knew it immediately, and asked them what they thought.  They stated they weren't comfortable with their agent.  I happen to know a lot of agents across the US, and in this market (Salt Lake City) I know one of the best - but the one I know doesn't actively help buyers, but I knew he'd know who to talk with.  He did, and the buyers were beyond thrilled.  From California, I connected a customer from Colorado with a great agent in Salt Lake City to get an offer accepted and closed in under 30 days, in an extremely competitive market.  How many "local lenders" are doing that?


I'm not knocking your local lender.  They may be great.  But they're not great because they're local.  There are also a ton of call centers out there hiring people like that idiot from 2007 I described earlier to pose as professionals, but those call centers are 'the local lender' to someone.  If you don't know the lender involved in a transaction, you're rolling the dice.  But when you do know the lender involved, you're rolling the dice, too - even the best of us make mistakes.  When we're good, mistakes happen less and less (and more importantly, we know how to fix them and keep things on track without any major issues), but being local doesn't magically make us smarter, harder working, and more experienced.  Actively learning, working hard, and having a long record of successful transactions does that.

Agents advising people that anyone "not local" isn't a good option are limiting options for their customers.  They could potentially be costing their customers more (I know an awful lot of loan officers making a killing because their costs are higher and the "local agents" keep sending them "local business"), and worst case, feeding a poison pill to sellers and buyers alike that could cost them, all because of some stupid myth that lenders can't effectively do their jobs outside of a certain radius, behind a state line, or on the other side of a pre-established time zone.  

If it's not obvious by now, the "your lender should be local" myth is one that I wish would die a swift death, because we've proven time and time again it's not true.  But how can you address the real issues of not knowing a lender, or getting around some vague story about how someone at (insert lender here), somewhere, at some time, screwed up a deal?  Here's a quick and easy way to know what you're dealing with:


- Don't be lazy.  Ask questions.  Interview the lender.  A good lender isn't afraid of questions, because they, like you, should have the client's best interests at heart.  Do they have experience in the area?  Do they know local closing costs, closing process, etc?  They should - and you can find out quickly if they do, simply by asking.

- Don't be afraid to "step on toes".  Again, when everyone has the client's best interest at heart, it's understandable (and welcome!) from a lender's perspective to gets asked questions, even grilled a little bit.

- Don't assume.  Sure, I'm a lender in California.  But did you know - I've lived in PA, DE, NC, KS, CT, and of those states I'm licensed in, when I moved away from them, I didn't instantly lose my entire knowledge of how things work there.

- Check online reviews.  Can you find the lender online?  If not, that's a big ole' giant red flag right off the bat.  Are 100% of their reviews from customers in Portland, Oregon and your transaction is in Portland, Maine??  Well Houston, you may have a problem.  But if you see positive reviews all over the country, it very likely could mean you've got yourself a great resource and a great lender.

- Check NMLS.  It's super easy to dig up dirt, and good loan officers typically don't change companies every 2 months.  You can quickly and easily see someone's employment history and where  they're licensed.  If last month they were whipping up smoothies at Jamba Juice and this month they want your client to trust them with the biggest financial transaction of their lifetime, maybe it's a good time to get a 2nd opinion.  But if they've been doing loans consistently for a long time, and the online reviews check out, odds are you (or your client) are in good hands.


There are some amazing national lenders out there.  In fact, where I'm not licensed, regardless of the state, I refer clients regularly to a guy in Connecticut.  Certainly not because he's local, but because he's great at what he does!  There are also some terrible national lenders.  But the same is true in your local market.  There are very likely some rockstars amongst many dunces.  So let's all stop pretending "local" is good and "not local" is bad.  

Posted by

John Meussner
NMLS ID #138061

It's more than a house - it's home.  So we offer a wide range of mortgage products at competitive prices to help our clients achieve financial security at home.  While we get great feedback on our prices and products, many clients say their favorite part of working with John Meussner & MasonMac is the level of service provided along the way.

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Comments (14)

Ed Silva, 203-206-0754
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Real estate is local and most buyer's agents like to work with familiar lenders and may casually try to encourage their clients to try a 'lender they know' just because.  Confidence is everything and a client needs to feel comfort in all the people involved in their purchase as it is one of the largest purchases they may make.  If it's a lender that was referred to them by a close friend or family member and they had gotten good service, geography doesn't matter

Jan 18, 2022 04:35 PM
John Meussner

Totally agree Ed Silva - at some point, no one knew their lender, but as you mentioned, good service is more important than location

Jan 18, 2022 04:41 PM
John Meussner

Anna Banana Kruchten CRS, Phoenix Broker a strong referral can be priceless!  I've made many connections the same way : )

Jan 19, 2022 11:00 AM
Anna "Banana" Kruchten

John I may not have known a lender at first but I trusted the folks who referred them. 

Jan 19, 2022 10:56 AM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello John - lesson learned.  People can make a big difference.  

Jan 19, 2022 04:41 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

The skill of anyone in any industry should be what is most important. Do they know how to do a stellar job? Are they appropriately licensed? Do they practice excellent customer service? That's what gets the job done.

Jan 19, 2022 05:04 AM
John Meussner

Couldn't agree more!  When you made your move, I know you didn't forget how to do real estate and practice stellar service!

Jan 19, 2022 11:01 AM
Erik Hiss
Keller Williams Capital Partners Realty - Worthington, OH
You can trust me for all your real estate needs!

Thanks for the write up. Boy I was in the same place many years ago...writing offers on the back of a car trunk not knowing what the heck I was doing. But in any case, a good lender is a good lender. And a good agent is a good agent. Hard work, persistence and good will are what are needed. Local only helps when there are specific deals that help with local knowledge and customs. 

Jan 19, 2022 05:22 AM
Anna "Banana" Kruchten
HomeSmart Real Estate - Phoenix, AZ

Hi John I have had excellent service from our local lenders for many years.  I know they will get the job done and on time with no drama.  I have had terrible experiences with a few out of state lenders when there was no other option - all big banks.  The right hand didn't what the left hand was doing and things got pushed out.  Not good for the clients.  

Jan 19, 2022 10:55 AM
John Meussner

I've seen similar experiences - big banks (and huge national lenders) tend to be a crapshoot - they have some great folks, and many more not so great folks.  But if a customer is "handed off" (in almost any large, high volume lending operation, more than one person works with customers), the LO needs to be available and not disappear, because you're right, that's not good for clients!

Jan 19, 2022 11:10 AM
Anna "Banana" Kruchten

Yup!  That's what I'm talking about John!  What LO? I guess.

Jan 19, 2022 12:46 PM
Patricia Kennedy
RLAH@Properties - Washington, DC
Home in the Capital

I think a lot of agents use the "local lender" thing to avoid Lending Tree or other online outfits who, much like Zillow, use the business to harvest leads they send out. And even groups national groups who do a lot of advertising online and on TV may have good products, but they don't all have a great reputation for understanding the importance of meeting the various contract deadlines for appraisal of financing contingencies.  But you're right about having an office in a particular geographic area making much difference at all.  

Jan 19, 2022 12:17 PM
Dr. Paula McDonald

Patricia! How are you? I haven't seen you around in so long. Hope you are doing well.

Jan 19, 2022 12:32 PM
John Meussner

Hi Pat!  Like Dr. Paula McDonald said, good to see you back in the rain! : )

And I agree - - it's really important we differentiate between 'call centers' and 'out of state/out of area' lenders, because they're night and day! 

Jan 19, 2022 05:06 PM
Dr. Paula McDonald
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

An excellent and detailed post on an important topic. Too many just randomly choose a Lender they know nothing about.

Jan 19, 2022 12:32 PM
John Meussner

Thank you, and I couldn't agree more - - had a conversation today, a lender with better rates than us set a customer up for a worse and more costly loan product.  They were local! : )

Jan 19, 2022 05:07 PM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi John Meussner - I agree with Anna Banana Kruchten CRS, Phoenix Broker and have had similar experiences with out-of-state lenders.  It is about relationships and yes, if you can establish a good relationship and communication it may work out.  I have found that out-of-sate lenders tend to pull appraisers from out of the area and the appraisals usually take longer and are lower because they don't know the Sedona market.  The local lenders know the agents and brokers well and understand our market. 

My most recent listing finally closed (today in fact).  It was supposed to close before Xmas.  The buyer got a great rate but the non-local lender got an appraiser from out of the area and my sellers lost a home because this home didn't close before Xmas. A local lender would have bent over backwards to get this loan closed on-time.  

Jan 19, 2022 05:40 PM
Anna "Banana" Kruchten

Sorry for your client Sheri Sperry - MCNE® ...been there had that happen to one of our clients in the last few years.  Trust is so important.

Jan 19, 2022 08:19 PM
John Meussner

Ouch!  Its never fun when that happens.  We have the ability to use "panel" appraisers in any market, meaning we control things more than management companies can.  In most markets, we have great appraisers, and some more rural areas we have trouble in, but in those areas, even local appraisers get backlogged and it ends up creating a mess.

Jan 20, 2022 05:37 PM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

I so appreciate this post.  A past buyer client chose their own local agent.  It became very clear early on that this guy was very new to the business.  The buyer never closed so neither the lender or myself earned anything for a long, tedious contract.  The lender assured me that he could close early, not!  

Jan 19, 2022 09:17 PM
John Meussner

It's a tough industry for new LOs, and most companies offer very poor training, it's often "Screw up until you learn enough to not screw up!", and it's a shame.  But my advice to new LOs is to start on a team with an experienced LO until you know enough to go out on your own, that's what we do on my team with our newer team members...I'm holding their hand from day 1 through closing.

Jan 20, 2022 05:34 PM
Lynn B. Friedman CRS Atlanta, GA 404-939-2727
Atlanta Homes ODAT Realty - Love our Great City - Love our Clients! Buckhead - Midtown - Westside - Atlanta, GA
Concierge Service for Our Atlanta Sellers & Buyers

John Meussner 
After reading your excellent post and all the comments - I think you made a VERY important statement: it's really important we differentiate between 'call centers' and 'out of state/out of area' All the best - Lynn

Jan 19, 2022 09:48 PM
John Meussner

Oh yes, those 2 are very, very different!

Jan 20, 2022 05:32 PM
Matt Brady
Watermark Capital - Del Mar, CA
One of San Diego's Best Lenders

Hi John, I would argue that technology has changed our business dramatically and that being a "local" lender was more important in the past. Taking applications face to face and having relationships with Title, Escrow and appraisers was possible and important. All of that has been legislated out of our world and I can fund a loan anywhere as efficiently as I do in my local market. The reason to avoid large national call centers is not that they are not local, it is because they do not and cannot hire loan officers like you and me.

Jan 20, 2022 07:46 AM
John Meussner

100%, couldn't agree more!  What we've sacrificed in flexibility and some great things legislation has ruined, we do have the ability to now work anywhere, and work well, for customers all over.

Jan 20, 2022 05:32 PM
Andrew Mooers | 207.532.6573
Northern Maine Real Estate-Aroostook County Broker

Maybe in Cali but not in Maine. Totally disagree said respectfully John Meussner and here is why. The six live and local loan arranger lenders in my town with instate mortgage processing centers run circles around the "you are just a number" bigger Goliath's.

1) There is a shortage of appraisers nationwide, in Maine too. So the big out of state lender uses AMC (Appraisal Management Companies) to handle their valuation assignments.

Real estate is local, those appraisers that  live where the properties are know the lay of the land and have area of expertise knowledge. Local banks just assign and no kick back fee (something that sounds like Z would do huh?)  Why would the busier than a one arm paper hanger local appraisers give back a 15% or greater fee,  and endure never ending follow up calls to revise this, change that. Or explain why in rural Maine, all your comp listing sale are NOT going to be the same street, zip code and from the same 300 lot subdivision.

2) The AMC that gets no takers for local appraiser assignments spends weeks searching the state for someone, anyone to do the appraisal. Usually we get to the 6 to 8 week mark and still no appraisal order. Seller says, pull the plug, not going to do an extension and they don't have to in the current brisk market thanks to COVID and many cash not financed sales.

3) The AMC nine out of ten times in my experience kills the sale. The local banks get the mortgage underwriting through the hoops and hurdles like a champ. And I know what's happening all the way to relay to buyer and seller. Not having to call, leave a voice mail and email endlessly to find out what is the delay. Locally I can tool into the local bank lobby We try to show the buyer the merits of a local lender and using the same bank with the drive through  after the sale and their move to rural Maine.

4) The AMC in the 11th hour will try to offer an appraiser three, four times their fee to please take the assignment to dilute the AMC larceny fee. To drop everything, take a trip over four hours north into a region that is not their local scope of expertise and try to crank out an appraisal. Who pays that ching ching fee? The buyer. Local is the way to go in my market. And when the property needs updates for underwriting, how long is it going to take that far away appraiser to return to sign off that all is well? Too much time eaten up for the clear to close memo if it ever comes.

5) Local attorneys that know their way around the registry of deeds for the title update, local insurance agencies to issue the binder who actually toured the property that gets the right coverage.

6) All those local service providers from the bank, title, insurance and beyond if local are future resources too. They live, work, play locally. Every dollar from their involvement in the buy a home or whatever real estate listing turns over six to seven times in our local economy too.

Jan 21, 2022 07:50 AM
John Meussner

There are no rules though, that say "an AMC is required".  We prefer panel appraisers - we seek out good, local appraisers in the markets we work in most often, and work with them, avoiding AMCs altogether - it's possible : )


We also set up relationships with local attorneys/title companies -- I'm in Northern CA, and 3 of my top favorite 4 favorite title reps are in North Carolina, Colorado, and Connecticut, respectively.  We try to work with the best, not the easiest or any random online following.  But I also don't have to be local to do that : )

Jan 21, 2022 03:02 PM
Andrew Mooers | 207.532.6573

The AMC comes into play when your lender is out of the midwest, southeast or west coast though... no getting around it because the lender is not local, no instate. Local lenders work all the time with local appraisers. The never lent money in your local real estate market before one is a fish out of water and underwriters have to be brought up to speed on the uniqueness of every market that operates differently. Who has time for that education that is a time suck?

Your best appraisers where I live, from my experience avoids the hassle because it is time consuming, you lose money off the top rebating part of the fee. I have had Maine appraisers tell me they would rather pay a $100 to not take that assignment because of the nightmare last time with revision after revision and the appraisal review with a hundred eyeballs to pass through nothing like Maine. Where the bank manager lives two towns away, not 16 states away from the subject property. It is David and Goliath different and small loans, no problem. No minimum mortgage levels. Not about making money only and more "love all, serve all" mortgage needs in small local up close and personal rural Maine community lending.

Jan 22, 2022 05:47 AM
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

I just respectfully disagree!  In my second home, retirement community generally out of state lenders are a disaster! Appraisals are the worst problem. A home in a standard inland subdivision is a simple appraisal. A beach home is very different. Two or three blocks can make a Hugh difference! All of the out of area lenders use appraisal services from metropolitan areas. Tell me how an appraiser that comes to an areaonce or twice year from 150 miles away can do a good t

Jan 22, 2022 12:55 PM
John Meussner

Part of any appraiser accepting an assignment is their agreement that they understand and have knowledge of that market.  If that isn't the case, they shouldn't be performing the appraisal.

Jan 24, 2022 11:26 AM
Gwen Fowler SC Lakes & Mountains 864-710-4518
Gwen Fowler Real Estate, Inc - Walhalla, SC
Gwen Fowler Real Estate, Inc.

Knowledge is gained through experience and both are very important in a real estate transaction.

Jan 24, 2022 05:58 AM