Tuesday, January 19, 2010

Use the lender you said you would in your offer

I had a situation where a buyer decided to try and get funding from a lender other than the one they got their pre-approval letter from. In my book this is a HUGE mistake on the buyer's part.

First, the pre-approving lender can keep the loan on track and not waste several days reviewing a loan application. Second, if you're going to change (for whatever reason) notify the listing agent immediately. If the buyer is rate shopping, fine but don't forget you have a financing contingency deadline to meet.

As it is, wasting time with no-name lenders and mortgage brokers often leads to conditions and issues that put the deal at risk. It may force the seller to grant an extension because the buyer and their agent didn't do what they said they would do. Shopping rates or lenders after going into contract puts the transaction at risk and shows poor communication between the buyer and agent as well as the buyer's agent and the seller's agent.

As a buyer, if you want or need to change from the lender you said you would use, be upfront about it. In this case, the buyer was trying to get a cheaper loan - that's understandable. However, because the buyer was denied, 9 days were wasted in the escrow process.

Buyers - do you think you should have to communicate about something like this?
Agents - what would you do in this situation?

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