A year and a half ago, when I listed my first REO, the selling banks were being less cautious about the pre-qualification letters submitted with the offers. But then too many deals fell through, a lot of time was wasted and, as property values were still declining then, money was lost when the property had to be returned to the market to find another buyer two to three months later.
Most banks then decided that they would not consider an offer unless it had a pre-approval from one of their own branches. In theory it sounds benign enough. It certainly is a way to do away with the “fluffy” pre-approvals that aren’t worth the paper they are written on. But in this market, where each foreclosure that is listed garners at least 10 offers (and in some cases 40 and 50 offers), having to pre-qualify your buyer with a different lender every time you submit an offer is ridiculous.
I have a buyer who has been looking for almost a year now. He’s getting really frustrated that not enough properties matching his criteria are showing up. And when one does, we submit an offer immediately to try and get in before the slew of offers comes in. We put together really decent offers. They have been above asking price, but not ridiculously high just to get the offer accepted. We dot all our I’s. We cross all our T’s. We fill in all our blanks. We submit copies of our earnest money and copies of our pre-approvals.
But what happens when you get really tired of having your credit pulled time and time again just to get pre-qualified by the seller’s choice of bank? Unfortunately, there’s not much that can be done. The listing agent won’t submit the offer without that new pre-qual. I am dealing with an offer we submitted yesterday on a foreclosure. I submitted a brand new DU approval with the offer from my buyer’s mortgage person. This was a DU that was pulled for this buyer, for this home, for this purchase price and still the listing agent won’t accept it. He insists that we go to his mortgage broker for a pre-qual.
It sounds to me like this is the listing agent’s requirement, not the sellers’. The reason I think this is because most sellers are having buyers prequalified by their own entity. Wells Fargo wants Wells Fargo pre-qualifications. Chase wants Chase. But with this one, I am being asked to take my buyer to a local mortgage broker, not a direct lender for their approval.
Now, I am not a mortgage broker and will never be. I prefer to let each practice his own specialty and will not try to wear two hats, with neither fitting quite right. But isn’t a DU approval just as good from one mortgage broker as from another? Maybe this is where I am wrong on this. Because I am not a mortgage broker, I may be misunderstanding the power of the DU.
What I do know is that a real estate agent can be as frustrated as her buyers. Oy vey.
Maggie Dokic, SFR is a licensed real estate broker in the state of Florida selling residential real estate in Miami, Palmetto Bay, Pinecrest, Coral Gables, Gables by the Sea, High Pines, the Redland and other select areas of SW Miami-Dade County.
Maggie has earned her SFR certification to be able to better serve the needs of her customers in today's non-traditional real estate market. SFR is a Short Sale, Foreclosure Resource Specialist. Designees have been trained to understand the highly specialized options available to Sellers facing short sales & foreclosures and Buyers looking to buy them.
For more information on our local real estate market, or to see or sell a home in Miami, Palmetto Bay, Pinecrest, Coral Gables or the Redland, visit my Miami Real Estate blog or contact me at Maggie (at) TheBlogThatAteMiami (dot) com.
The opinions expressed herein, are those of the author, and not necessarily of Keller Williams Realty.
None of this information is to be deemed legal or financial advice. Please contact your attorney or accountant for same.
Frustrating isn't it? I've had some of the same issues, and I still try to figure out how if my buyer are using the seller's lending and pre-qualifying keeps the transaction arms-length....now that the 'seller' knows exactly how much my buyer can afford what's to say they don't use that information to get more cash down, a higher offer, etc...from my buyer client. Other times I notice the listing agents have them 'sold' prior to getting it in the MLS because of the delay of the assignment to actually listing it.
No!!
DU Approval is only as good as the input data. "Garbage in - Garbage out"
If some idiot broker calculates income wrong and gives you a DU Approval... then it is worthless. As the income may kill the deal.
Remember: DU is run as a final condition of th loan after underwriter has adjusted any and all bad data.
Be especially careful of preapprovals during the DU update that is looming. You could get an approval under old guidelines and get that deal killed after it is run under new guidelines.
Paul, yes, the foreclosures are very frustrating. I really do comiserate with my customers.
Tom, thank you for clearing that up. That does make perfect sense. It never occurred to me that someone would provide false information .....DUH! When are those new guidelines going into effect?
Maggie - youa re so right...the repeated approval process when you have no choice but to consider multiple homes is a pain. It takes time, too. I do understand why REO lenders are requiring this but you have to wonder if there is some other better solution.
Jeff
Jeff, they should all pool together to come up with a better standard of practice. Perhaps even an agreement to accept a pre-qualification from any of the 5 biggest lenders, let's say. And they could put a 60 or 90 day limit on the age of the letter. It would limit the pulling of credit to once every 3 months. That's the part that frustrates me. Not the extra work, but the fact that my customer is very likely suffering FICO damages by having his credit pulled repeatedly.
Maggie, I haven't heard of this practice here but I can imagine it can become a real issue! I wouldn't like having my credit score "hit" on so many times, especially when trying to buy..........that's the worst time to do it.
Carole, preciesely. This poor guy has had his credit pulled at least 6 times in the time we've been working together. There's got to be a better way around the seller's needs for this.
I think we have to come back to a standard of "reasonableness". I think there are a lot of new policies that really make no sense at all.
Hey Maggie...just wanted to stop by and wish you a very Happy New Year!!! Now lets have a great 2010!!
Joan, so true!
Sergio, thanks. Let's rock and roll!
Ginevra, that is precisely the reason this makes no sense. If they had no alternatives, I could understand the banks'requirement. But that isn't so. They DO have options.
It would be great if they could work WITH us instead of going against common sense.
Hi Maggie, As a Mortgage Broker I understand your frustration. I see this as a way to steal a Mortgage client away from me by trying to undercut the rate, even though I would usually be the one who was doing the work with the initial qualification and explanation of the Mortgage. This is the case primarily with first time home buyers.
Yes, a DU approval is a DU approval, but the REO companies want ti run through their own people. Funny thing is that some of the Bank of America or Wells Fargo people aren't even very good at putting together a prequal and the client sometimes doesn't qualify anyway.
Either way, I love the blog. You and I had spoken sometime ago. I am a friend of Carlos Villanueva's and we were in BNI together. I think you were getting payroll done through Darwin from South Florida Payroll who is also in my BNI chapter.
Thanks!
Phil Stevenson - Your Miami Mortgage Expert
Phil, yes! I remember you. I didn't realize you were a Rainer too. I tried to get colleagues onboard, but not many want to take the time to blog. Oh well.