UPDATE *** UPDATE *** UPDATE *** See the bottom of this post.
VENT AHEAD!
I've been showing a ton of property lately. And while showing property, I am seeing it more and more in the LISTING AGENTS' REMARKS: Submit offer with PRE-APPROVAL letter from XYZ BANK, with FICO SCORES included, or your offer will NOT be submitted. (This is NOT happening in my local MLS, but instead from an Out-of-Area MLS) who lists homes in our mountain area.
On a recent offer I submitted for my buyers (on a repo property), they ALREADY had a lender and a pre-approval letter, as I had them do that before we went previewing homes. I included that letter with their offer to the listing agent. Then, THAT agent, or his bank, kicked back our offer DEMANDING my buyers get PRE-APPROVED WITH BANK OF AMERICA/Glendale Branch, or my offer would not be considered.
Is it me, or does this STINK to high heaven??? How can a Listing Agent, OR a BANK, tell MY client they MUST use a particular business/bank? I'm not certain this is even legal. I have a call into both the CALIFORNIA ASSOCIATION OF REALTORS (C.A.R.) and the MLS Board where this is happening.
I'd like to hear your comments and opinions.
...I'll also let you know what the legal hot-line tells me once I speak with them.
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*** UPDATE: I just spoke with an Attorney with C.A.R. who did say it is OKAY FOR THE AGENT TO PUT INTO REMARKS that a BUYER pre-qual or pre-approve with a "Certain" lender. HOWEVER, he/she MUST have an agreement with that LENDER, where as the bank has said they will not look at any offers unless buyers follows those requests/guidelines.
However, the Attorney agreed with me that these types of 'REQUESTS" could begin to tick off buyers, thus eliminating some of the buyers buying pool.
I discussed with him my FEAR that some Realtors could be "working" too closely with some of these BANKS, in which he brought up RESPA. GREAT POINT, I told him.
So for now, I guess these BONEHEAD BANKS can get away with this. BUT I am thinking, they'll eventually start screwing up and this issue will one day (soon I am betting) make front page news!
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Kss this!
Kat,
I've seen this too and I don't know how it can be legal. It sure isn't ethical! I'm looking forward to hearing what you find out, and hope you submit your findings as a new blog entry!
Have a great day!
I'll play devil's advocate here. While i'm sure that you have fully vetted your lenders and have full knowledge that they know what they're doing, it makes sense as a listing agent-especially on time sensitive short sales or REO deals-that the buyer be checked out by another lender. It doesn't hurt the buyer, it strengthens their offer. Too many banks and mortgage brokers have either gone out of business or changed the rules halfway through-or they had no idea of the changes and pre-approved buyers who can't buy a thing.
As usual, we wind up working against the bottom tier of agents and our good clients have to take an extra step. Isn't that the whole story of real estate right now? Try not to take it personally-it's not a slam on you and your professionalism. =)
Kat, as a mortgage professional, I appreciate your frustration. If I have taken the time and money (as I must pay for a credit report) in getting someone pre-approved...I would be crabby that the listing agent/bank would require me to lose out on the business. Looking forward to hearing the rest of the story.
I agree...I think by adding that comment in the listing, you are actually driving buyers away. I was working with a buyer that more than qualified for the home I was showing her, and I mentioned that that particular property required her to get preapproval from the sellers' lender. Since she had already met with a lender (not some .com lender!) she was pretty offended! I sold her another home :~) And what happened to the home I showed her a year ago??? It's still for sale!
This is very common in my market. I recently closed a deal where my client had been preapproved at her local hometown bank. The seller(bank) required a preapproval from their bank to consider the offer.
It was very easy. The 2 bank loan officers talked and exchanged info, then their bank issued a letter and the deal was accepted. My client got her original loan and all was well
It's just a preapproval..it doesn't mean the buyer has to USE their lender. I can see this from their point of view. They just want to make sure the purchase will close before they accept an offer and the property comes off the market.
Bank of America Homes Loans requires a pre-qualification letter from one of their loan officers. And, they offer incentives if you use them for the mortgage financing. However, your buyer is NOT required to use them as a lender. Your buyer can still use his lender of choice.
Other lenders such as Wells Fargo have the same requirement. Too many agents are submitting worthless pre-qualification letters from lenders that do not deliver.
If you want to work in the REO sector, you need to be willing to play by the rules of the game. Does not mean that you have to like the rules!
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Coleen: I WILL UPDATE once I speak with an ATTORNEY with C.A.R. about this, be sure. Thank for adding your view.
Leigh: There certainly are two sides to everything...and I appreicate your thoughts.
Sarah: Exactly!
Kelli: I DON'T blame your buyer at all, as it is the same thoughts my buyers have.
Roy: Very interesting feedback. Thank you. But I am still looking forward to speaking with an expert. Seems to me, that when a BUYER is qualified, they should NOT have to do double work as a punishment because "some" buyers are not qualified and BECAUSE some BANKS want to try and get more business. STINKS to me.
RULES? I didn't know this was a RULE.
It is a problem! Do you know that whenever someone pulls your credit, your credit score goes DOWN? By requiring another approval, it will lower the purchaser's FICO score. What happens if they are on the edge. Will they not be approved or have to pay a higher interest rate?
What is this offer doesn't go through and they have to start the process over again, perhaps a couple more times?
This is not at all uncommon in my area. As stated above, the buyers don't have to use the preferred lender, they just have to get preapproved. There have been many prequal letters in the past that haven't been worth the paper they're written on. The sellers and their representatives just want to be sure the deal closes.
We see it here in Florida all the time. The reason I think is primarily the lender (who nows owns the home) does want to entertain offers (even those previously approved by other lenders) without verifying that the buyer has purchasing power. I do often notice, that there is a disclaimer attached which reflects that the buyer is sfree to choose their lender, which here is how they are sidestepping th elegal issue.
Interested is seeing how it plays out on a National level.
Norma: That is an excellent point!!!! Thank you.
Geri: So punishing GOOD buyers is the way it is going??? Seems crazy to me.
#12: I'm excited to find out myself.
I just have my clients mortgage professional contact the required lender so that approval can be granted and the offer can go forward. I totally agree with you on this, but I also have the responsibility to help my clients get the home they want. Let me know what you find out from the legal hot line.
Kat- This pisses me off too! I think Donne Knudsen Or Janet Guibault will probably have something to say about this to...as both have RUN into this!
This HAS to be illegal! It has to be! If it isn't yet, it will be! As I have told Janet g and others, we have not run into this here in the Madison Wisconsin area...but everyone that I talk with in California seems to have this problem. I am begining to wonder if it is FOCUSED in California...OR, if it is just because you have one of the highest reo/foreclosure area/listings!
I am going to follow this today, as I am VERY interested in your responses!
Thanks ! bucky
Daniel. INTERESTING. I will also suggest that my buyer do as you have your clients. I WILL post my findings here.
Bucky: I THINK it STINKS like a smelly skunk and I am not letting up. I plan to contact N.A.R. also!!! If it is in CA mostly, then they (BANKS and AGENTS) need to learn a hard lesson.
WILL BE POSTING MY FINDINGS AS SOON AS I KNOW.
THANKS.
My first thought is that it's illegal for an agent to NOT submit an offer...regardless of the terms. After all, it's the seller's final decision as to whether or not to accept it.
Keep us posted on the outcome!
Craig: GREAT POINT!
Kat, it is common in NJ as well, Mostly with CW/BofA.... To a certain extent it makes sense, and they do not force the buyer to use them, just be qualified by them prior to taking a home off the market for an "unknown". CW used to feed a few "special" agents... and that word special is in quotes for NUMEROUS reasons. (I think they are chose by there lack of professionalisim!) and when they feed them, they expect to be fed back... one hand does wash the other after all.
Kat - this is happening here as well, and I have had to have my clients call their lender to pre-approval to submit the offer. I just had another offer where the listing agent required desk top underwriting as part of the offer. I will look forward to finding out about this . . thanks Kat.
Robert: It IS the feeding that really bothers me. CAR has received my request to speak to them...just waiting.
Sharon: You'll get the results as soon as I do.
Unfortunately, I THINK it may be par-for-the-course. Even my Broker says it is OK, but a bank canNOT make the buyer use them.
Kat,
Good for you! How many consumers understand the explanation that Roy offered...Most consumers would feel an obligation to use the Bank Of America or that suggested by the forecloser or attorney...!!! Thanks, Fran
Fran: THANK YOU!!! I agree 101%. This is one reason that consumers don't trust US... crap like this. I DON'T like this one bit.
And as to what Roy said, HELLO; I didn't know THIS WAS A GAME! Are YOU playing with people's MONEY? I'm sure not.
This is common here in middle Tennessee too especially with BofA and Wells. Now they are adding that the potential buyer's FICO score has been disclosed along with requiring the pre-approval from their own mortgage company. That's just too much disclosure for me. Next they'll want some DNA.
Just goes to show you...YOU are willing to do anything for your clients including finding out about the guidelines and legalities for them, instead of just telling them let's forget about it and move on to the next property. For an awesome agent in the Lake Arrowhead, CA mountain communities...YOU are the agent to see! Kat De Long Keep on doin' what your doin', that's awesome!
Michelle: Have I told you lately how MUCH I APPRECIATE YOU???? I do!
This problem is an epidemic. I understand the bank's need to entertain qualified buyers and I can see them demanding that a person(s) be qualified, but the fact that they insist on running the potential buyers credit is ridiculous. My buyer's credit has been run because no agent in their right mind is going to show properties to an unqualified buyer. Now to put in an offer, seller demands a pre-approval from the REO branch. Credit gets pulled again. They don't accept that offer and two weeks later, another possibility hits the MLS and then that lender wants to run credit again. So it won't be long before my buyer no longer has a decent FICO and guess who he/she is going to blame? Me, for not explaining the ramifications of running their credit 3,4,5 times. There are some credit savvy people out here, but there are a lot of first time buyers that need a little schooling and/or protection from these practices.
Simple solution: The lenders should accept an existing credit report that is less than 90 days old. Not that “free” internet crap, but the actual credit report that was used to pre-approve the buyer.
BTW the person I spoke to at C.A.R. didn't really have a clue. I had to explain the scenario several times. The consensus was that If I could prove that the bank's agreement with the listing firm DID NOT specify that potential buyers had to have their credit run by the owner/lender then maybe we would have a leg to stand on. Fat chance in getting that paperwork, and even if I could prove that their practices are potentially harmful to the buyer's ability to qualify, it would take the MLS boards to prohibit such declarations on the listings to re-enforce the unfairness of the practice.
In speaking with several people regarding the subject, it will probably take a lawsuit to motivate the banks to change their policy… if it’s even their policy.
I’m usually a positive outlook kind of guy, but this one really smells foul. Is it possible that some of these agents and have some sort of arrangement with the loan officers? Did I say that out loud…
L Delado: I am with you 100%... I just wrote another post after this one. It is getting worse and worse by the day; epidemic? EXACTLY
I have had more than one deal where we complied with the secnd preapproval. In two of my cases, the "suggested" preapproval lender actually started interferring with the deal and in one case had the buyer so upset that the deal almost fell through. I agree with everyone that this practice should be stopped.
Linda... I am sure hoping it is. The only person (from my area) that I had a "bad" reaction from, was an Agent who strickly does REPOs.
This is a great thread. I'll toss my two cents into the mix. I have both a real estate company and a mortgage brokerage. So I have the "pleasure" of working through both sides of this equation. When the distressed market first hit, and we started seeing the cross qualification mandate, I was..well distressed. Why on earth should I turn my buyer/loan client over to a mysterious mortgage broker? One that's probably been in the business about 20 minutes or so. Well, the reality is, because cross-qualing can be dictated by the listing agent.Requiring a buyer to use that company is not. As a selling agent, I dislike the entire process ttremendously. The biggest hassle is in getting that mortgage rep to call my client and get their information. That alone can take days. Couple that with then getting our 20 minute rep to give their blessing, and that property can already be gone. So to me, the real flaw is with that rep. He/she probably has 30-40 other cross-quals to do. And they know their conversion ration is less than that of hair on my head.
Now on to being devil's advocate for a minute. Being the listing agent on distressed properties, I've seen some pretty frightening offers come across my desk. A lot of the pre-qual letters are a joke. And let's be honest here. How many of us have a Pre-Qual template all saved up and ready to use in a Word doc? Raise your hands. They are actually more worthless than our 20 minute rep from above. As a listing broker, I do require income & credit documentation with an offer. In our declining market, it's a dis-service to let a seller go into escrow with a buyer that's shown no real ability to qualify.
What's the solution? For me, it's getting my buyers pre-APPROVED (huge difference)up front by an actual mortgage bank. Not only do I want a listing agent/seller to know my buyers' strenght, I want to be sure myself. No need to spend hours showing properties if they aren't qualified.
Pat: I appreciate both sides you gave us. I agree about the "joke pre-quals." And I am oky wih cross-qual, but I rarely see those words. I SEE MUST PRE-QUAL with ABC Bank or your offer will not be submitted.
I know there is a happy medium somewhere.
Thanks again!