Profile picture for Tined

Is it unethical for a seller to counter offer conditioning the buyer to use a certain lender?

If a selling agent adds a condition in the counter offer that require the buyer to use a mortgage company that the selling agent works for or benefits from, is this illegal to include in the counter offer (conflict of interest) or unethical or neither?
Thanks!
  • October 01 2013 - US
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Answers (9)

Many big box brokerages have an affiliation with mortgage and title companies.  Their agents strongly "push" those vendors.

The selling agent is incapable of interfering with the terms and conditions between you and the seller. That would be an ethical violation.

 If the selling agent wrote on the sales contract you HAD to use xyz mortgage company - simply cross it out, initial and date it and insert "buyers choice".  Have it sent back to the seller for signature.  As long as you have a pre-qualification from a reputable lender there should be no demands made upon you.

It is your right to select a lender.  That said - many agents advise sellers not to accept an offer from any lender who is internet based.  I don't want to mention names, but many advertise on TV and sound great, but rarely get to the closing table.
  • October 02 2013
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Profile picture for hpvanc
It's not unethical, I don't know about illegal. It is also not unethical and definitely not illegal for you to refuse to go along with it. As Sunny stated I would be extremely wary if the mortgage company is affiliated with the listing brokerage.

If they choose to stick to this requirement, you may have to find a different house and the seller will have to try to find a buyer willing to go along with their requirement.
  • October 02 2013
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I think the Gettysburg Address is mandatory in several states, though!

In actual practice, if this is a seller demand, the listing agent must convene with their broker, because this is an unreasonable restriction on the sale, and really needed to be disclosed as a condition of sale before the property was listed. We do this with seller financing listings, after all.

Most likely, however, Nina Harris has the correct evaluation of the question, which is that the listing agent urged the seller to require the buyer to be pre-approved by a local favored lender, which is absolutely legal and ethical.

All the best,
  • October 02 2013
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Profile picture for Rebecca Marvel
A bank isn't allowed to require you use a specific lender so a regular seller cannot either.  It's not really unethical, it is against the law.
  • October 02 2013
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Profile picture for sunnyview
I think it is a conflict of your best interest to use the seller's agent office's mortgage firm, but remember the seller's agent does not represent you. They want your financial information direct from their in house lender. They want that advantage at the negotiating table and the control of your mortgage details down to how the appraisal is handled.

I would not agree and would counter with your chose lender. If they say no, then I would walk.
  • October 02 2013
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Profile picture for NinaHarris
The seller can request that you go through a certain mortgage company to get pre-approved to make sure that you are a willing, able and qualified buyer, but can not demand that you actually use any particular company for your mortgage.  So no, this is not unethical or illegal.  In a seller's eyes, it could mean reducing the risk that they could lose 2 to 3 months on a loan that may not come to fruition.

In today's climate, certain seller's are asking for a lot more than a pre-approval through a specific mortgage company.  I have seen 2 years income tax returns, most recent pay stubs, proof of funds, etc.

Good luck!
  • October 02 2013
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Profile picture for Brookstone Mortgage
The seller can counter with whatever they want. Their counter can be that you must shave your eyebrows, stand on your head and recite The Gettysburg Address if they want. You can always say no. 
  • October 02 2013
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No, it's not unethical, and it's not unethical, per se, to have a conflict of interest.

Let's say the seller tells the listing agent (the selling agent represents the buyer, OK?) that, because you're affiliated with a mortgage company, I want the buyer to use that mortgage company. Is the seller within their rights? I think so.

Now, the counter offer comes back to you. It is fully disclosed that the purchase is conditioned upon you using that mortgage company. What's the problem?

You don't want to do it? Don't do it! Simple as that! If the seller had come back to you at a 50% higher price, you wouldn't agree to THAT, right?

All the best,
  • October 01 2013
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...to USE or APPLY WITH ? ? ?

  • October 01 2013
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