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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!?
Yes, I agree, and I use my better judgment when managing my and my client's time. I'm glad you brought it up though. For me when I select homes to show my client, based on their needs, I take a lot of things into account when weeding out which homes I don't show, or show last. Sometimes there are 10-15+ homes and there only so many hrs in one day, and a limit to how long my feet can walk in "work" shoes. If there were, say 2 homes that met my buyer's needs and they both required their own approval, that would different, but we're not in that kind of market now. What I do first if the home is a good fit is send the current approval with offers and go from there. Sometimes they accept, but others don't even allow LAs to present offers. Some times buyers say they will think about getting re-approved, but they almost always don't bother calling. I had a buyer once call me back mad and said the LO was just a "snake" trying to "steal" him without offering anything better than the first LO, who had worked on his file for a long time.
I'm sure I won't be the only one who will agree w you though, as that is a good point you bring up and we should not forget it!
The way to address this is contact the INVESTOR on the transaction. If the Bank is doing this on a fannie mae or freddie mac loan they are steering business to them self on a asset that is controlled by the Government. Yes they are using the Servicing of a Government Asset to build their business.
Call your Congressman and tell them about this. This removes an even playing field for lenders who do not service loans. Fannie and Freddie are controlled by FHFA. Don't just blog it write and complain. This is turning off buyers. The big banks are doing this to each other, as well as the smaller mortgage bankers. This is crazy and we are letting our clients get run all over town for this and then end up losing the deal because they may not use the bank.
Call HUD and scream STEERING which is a violation of RESPA. One thing for sure, if we just complain to each other we will see the same result, nothing will happen. When was the last time you took 15 minutest to write a letter to the NATIONAL Association of Realtors and told them to get their stuff into one bag. Why pay the fees if we are not going to tell them what to do. I pay the fees they work for ME!
Good point, George. I did call BofA on one of their assets because they refused to even look at my buyer's offer, which I sent with an FHA loan approval. And here I thought "credit worthiness" was the only requirement to buy a home.
I called the bank directly and they confirmed that that in fact was the case. They didn't even bother to ask how much the offer was for. Looks like they can do as they please. Wells Fargo has a home listed, for which I sent an offer on (again FHA ), but it's the same thing. They're offer went nowhere, not even a counter and the home sits on the market.
Lucky for them, I found them a better home with a much bigger yard!
An intesting topic and one I have been dealing with for several years now.
One of my major Asset Management Companies requires a Pre-Approval from a certain designated lender to be submitted with all offers.
The reason given to me, and I share with other agents who question this idea also, is this national company's fall out rate at close was huge from unqualified buyers. The amount of money and time lost was tremendous. They partnered up with this mortgage company who has strict guidlines to follow in doing their pre-approval and this practic has cut down their closing fall out rate by over half.
The buyer is under no obligation to use that lender, nor does that lender always have a better deal. Sometimes they do, some times they don't. It is totally up to the buyer to decide who they will be getting their financing through.