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Buyer Verification Services - Is this a Growing Trend?

By Martin E. Kalisker, Esq.

Real Estate Attorney MA 9505496/Broker

September 26, 2008 03:06 AM

Dear Active Rain Bloggers:

Are any of you familiar with Buyer Verification Services offered by the listing broker? Our affiliate, Weichert Financial, was recently written up in Realtor® Magazine as being one of the leaders in this new service to sellers. Essentially, the listing agent tells the seller that in addition to all the other great things that they will do to market the property, any buyer that is presented who is paying a) cash or b) using a lender or has a pre-approval letter from an unknown or "questionable" financial institution, will be required to be pre-approved by the broker's mortgage affiliate (in this case Weichert Financial). Thus, the seller is assured that the buyer is a serious buyer and will be able to close on the transaction because in the event that the original lender fails to wire the funds at closing, the mortgage affiliate (Weichert Financial) will step in and will close the deal with very short notice.

Before I offer this service to my sellers, I wanted to get the opinion of the Active Rain community. Is this a growing trend amongst real estate offices in your area? If you were representing the buyer, what would your reaction be? If you were the listing agent, presenting the Buyer Verification Service as an added benefit of listing with you, what are your feelings? What would the reaction of the seller be?

Thanks for your input everyone!

Martin

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Richard Iarossi

Coldwell Banker Residential Brokerage - Crofton, MD

Crofton MD Real Estate, Annapolis MD Real Estate

Martin, Sounds reasonable to provide this service. When it's been discussed in our area the discussion always focuses on the fact that if an agent starts down this path for one client he/she better be prepared to place the requirement on all clients.

Sep 26, 2008 03:12 AM

Angela Lawrence

Noble Merit, REALTORS® - Winston-Salem, NC

Broker/Owner

this service is not common in this area, we have no problem with it, we can see buyers having problems with it if they already know they are good to go with their lender.

Sep 26, 2008 03:22 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

I don't like it. This isn't a "service". This is a marketing gimmick to bring business to Weichert Financial.

For one thing, my last experience with a Weichert Financial loan officer was not positive. That aside because it was many years ago, there are several aspects of requiring the listing company to pre-approve a prospective buyer that recommend against it.

1. I believe that it's a way of introducing buyers to the Weichert Mortgage company at the expense of the seller's interests.

2. Any listing agent worth their salt should be able to identify the value of a pre-qual or pre-approval document that accompanies an offer. I have advised many sellers on the quality of the lender that produces the "lenders letter". If the mortgage company cannot originate a loan, the seller needs to think twice about accepting the offer. If the mortgage office doesn't communicate with the listing agent, the seller needs to think twice about accepting a buyer's officer.

3. The valuation of an offer is more complicated than just the buyer's lender. Requiring a signed Financial Statement is often more useful than who is doing the buyer's loan.

4. Listing agents need to learn their business and not be used as stalking horses for the broker's mortgage company.

We know why Weichert does this. We also know that many buyer's agents won't fall for it.

One more thing before my computer wears out. It's hard enough in this buyer's market to get a buyer to the point where they have selected a house to buy, made a mortgge application, etc. without then having to tell them, "Oh, by the way, you must make another loan application with THE SELLER'S BROKER'S LENDER to put an offer on this house.

A few banks require that buyers trying to buy a foreclosure be approved by the seller. We know that banks don't know how to sell real estate. Countrywide is notorious for this practice. Hardly a roll model.

Sep 26, 2008 03:31 AM

Richard Mielke

RE/MAX Results - Gettysburg, PA

REALTOR, Gettysburg Pennsylvania Real Estate

How would you define "questionable" financial institution? You could easily be caught up in the appearance of a fair housing case if you don't require it on every home you list. I think my buyers would have an objection to being "approved" by another lender after they have already have done so, especially since it is an affiliated lender to your company.

Sep 26, 2008 03:53 AM

Martin E. Kalisker, Esq.

Natick, MA

Real Estate Law From A Practical Perspective

All valid points so far. Thank you. Please don't focus on the name of the mortgage affiliate - many brokers have ownership in a mortgage "affiliate" with a different name. Unless you knew the ownership structure, it may be difficult to see the relationship between the broker and the mortgage company.

Even if the mortgage company wasn't related to me (I don't get referral fees from sending them to my affiliate- that is a violation of RESPA), I would still like to know if the concept is valid. What if my mortgage partner was Wells Fargo, for example. Like many brokers, I have a strong relationship with a particular loan officer who underwrites his own loans and to whom I always refer business. Using Buyer Verification, I would be using a trusted supplier who I know will not fall through on a commitment. Isn't that part of my fiduciary responsibility to the seller?

Doesn't this benefit both the seller and the buyer? Doesn't it make the job of the listing agent easier because he knows that the transaction will ultimately close with or without the buyer's original lender? Lenders are not a "protected class" under the federal or state fair housing laws nor is it against the law to require proof that the borrower is able to close the transaction that they have a contractual liability to fulfill.

This doesn't mean that I wouldn't present an offer to my seller if the buyer didn't want to get a back up pre-approval letter; it just means that the offer is not as strong as a duplicate offer with a recognized lender or with a back up pre-approval letter.

Maybe we should turn this around and ask the ABRs in Active Rainland - is it the responsibility of the buyer's agent to ensure that their clients offer will not be questioned by the seller because of an unknown or disreputable lender who has issued the pre-approval letter?

Sep 26, 2008 04:15 AM

Michele Reneau

Certified Staging Professional (CSP) Elite Instructor - Summerville, SC

Realtor, GRI ~ Charleston, SC Relocation Experts Team

In theory, it sounds like a great idea. However, I represented a buyer earlier this year approved with a reputable lender. Her credit score is on the edge, but their financials were great. The buyer settled on a new construction home. The builder requires approval by their lender partner and any incentives the builder offered is tied with the use of their lender. I have issues with that as it is, but that's another post. Anyhow, due to the delicacy of the situation, the buyer's original loan officer recommended against it since a hard pull would lower her score. Luckily, the builder cooperated and we had a successful closing, but potential could have went south. Personally, I use a lender verification form when I'm representing a seller. The buyer/his agent must submit it with the offer and it shows the level of approval. Usually credit is always checked, but income/assets and employment haven't been verified. This I have an issue with since buyers sometimes aren't exact their income numbers. If the buyer is approved VA/FHA, I also request a copy of the Automated Underwriting approval. As a seller's agent, it prudent for us to make sure we do this step. As a buyer's agent, we should be making sure the buyer has already walked through these steps.

Michele Reneau, CRS, ABR, GRI
Over 150 families served since 2004!
Military Relocation Specialist
www.CharlestonRelocationExperts.com

Sep 26, 2008 06:16 AM

Marcia Kramarz

Re/Max Executive Realty - Medway, MA

CDPE,LMC,CBR

But truthfully sellers may see it as an advantage - Especially in this market!

Sep 26, 2008 01:00 PM

Andy Raffle

Emery Federal Credit Union - Yardley, PA

Team Leader - NMLS#156564

I don;t think this is a market for Sellers to start making too many demands - like seeing their mortgage company - on a potential Buyer. I also agree with lenn that this smells like a way for Brand X mortgage to get in contact with more potential borrowers. Seems fishy to me.

Sep 30, 2008 11:10 PM