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I DISLIKE (and keep my buyers away) when a lender forces/insists on preapproving/qualifying an already pre-approved buyer, to even REVIEW their offer. In your view, is this a good prictice? And who benefits from this? I know of Wells Fargo and BofA doing that in my area and they don't like it when I complain about it!
I do not send any offers without a preapproval letter. I also check on the source of the preapproval to be certain it's reliable. When a lender REFUSES to even review an offer without their "preapproval" I can't help but wonder if they just want sell their loans at any cost, instead of selling the asset.
In cases like this, and on lenders who require a wet signature just to look at the offer, I do my best to find other homes for my buyers. In one case in a particular, the house is filthy top to buttom(my buyer saw a huge live roach and had to kill it so it wouldn't scare his kids!), so in my view THIS lender is NOT concerned with not "wasting time" selling the asset, which is a "reason" I've been given before as to why the requirement. If you care about selling an asset faster, why not market it better....by at least cleaning the thing? Show some pride in what you're selling....can you tell this irritates me!?
One lender I work with specifically states NOT to make these types of notations on their assets' MLS remarks, so as to NOT TO DRIVE BUYERS AWAY! So, it's not just me who thinks this practice is not right for business or for the investor's bottom line.
Are these assets being used as leverage to make more money in new loans, even at the expense of making values go down even more? Who is this practice good for, and why!?
I completely agree.
If someone sends an offer with no pre-approval than perhaps it makes sense to require pre-approval with sellers preferred lender. But otherwise this practice tends to drive many buyers and buyers agents away. This has a net effect of driving down the eventual sale price on the property. I have seen this occur a number of times from the perspective of a listing broker.
I see it as a good thing , from the listing agent's side. I cannot tell you how many "pre-approval letters" I have seen from various lenders and the buyer's credit history was never checked. There are just as many bad loan officers out there as there are agents!
I had my preferred L/O's I have used for this and if they gave me a thumbs up, I would pass it on to the asset manager. But we rejected a few offers when a proper credit check was done, saving us 45 to 60+ days by not getting into bad deals that had no hope of closing.
I think exercing good judgment and checking on approval letters is a good idea, which I do, but to have EVERY PRE-APPROVED buyer get ANOTHER pre-approval as a REQUIREMENT is where my issue lies.
So, I stand firm....if you require across-the-board preapproval through a specific lender (no exceptions), there are PLENTY of COOKIE -CUTTER properties that fit my buyers' needs.
This practice is good for the bank's bottom line. Obviously, the bank is trying to recapture the loan. They need to make money somewhere, right? I haven't seen any deals fall apart because of this, but I do remember when I was working with buyers, I fought this a lot. I know that the listing agent is not allowed to present offers without this preapproval.
If you went to dept stores to buy something with your AMEX and they made it a requirement for you to apply for their card(before ringing you up), what would you say?
I sure wouldn't like it. They can ask me if I wish to do so (to "save" 10%), not a problem but that's the difference here. They're not asking, they're forcing (you can call it anything you want).
This is a good topic, I can see the points on both sides. My buyer agents and I usually send the offers even without the lender required pre-approval. I talk to one of my prefer loan officers and he told me that he usually just pulling credit for people interested on the properties, but not closing too many loans. I also have to do what is the best for my client, if my client wants me to advertise one of his loan officers and try to help them get business, then I would do that. But also I have to be ethical and I will submit all offers to my client, even the most ludicrous ones.
I wouldn't worry too much about this, like my friend the loan officer says, the banks can't force anyone to use them to purchase a house, we are all free to use the one lender that we feel more comfortable with and who we trust, but if we really want a house we would let someone else pull our credit and check to make sure we qualify. Also the listing agent should submit all offers because of ethics and because we have to do what's best for our client and that usually is to sell their property quick and for the highest price.
Just like a seller can ask us not to present any offers below a certain amount, sellers have a right to say do not present any offers without an approval from their bank. Believe me, as an agent, I would love to submit all offers. But if your client says they don't want to see it, then you're just spinning your wheels.
You may actually be doing your buyers an dis-service and violating agency if you "avoid, or steer" them away from a listing because of your personal beliefs on pre approvals. I am an ABR and take my Agency Relationships very seriously. It is not our place to make decisions for our buyers it is our job to give them all the information and allow them to make the decisions. We are fiduciary's not principals. I suggest you educate them on the "cross-qualification" request by the seller and let them decide if they want to do so.