Profile picture for AnnieO1

Loan officer and real estate advice...

I'm thinking of making an offer on a bank owned property. The listing agent says I must be pre-qualified by his lender. When I called the loan officer I asked him if he were going to reveal the upper end of of what I'm qualified for to the bank. He said "yes!" I'm not comfortable with this at all. When I gave him the information needed for the pre-qual letter I told him that I only wanted to offer a certain amount. Now he is telling me that he knows there is a cash offer and that if I want to win the deal I should offer what he says. I don't think he's also a real estate agent, but how does he know about a cash offer on the property?

  
  • November 22 2009 - Reston
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Answers (68)

This deal may not be worth it - it sounds like you have no one representing your best interests, including you, since everyone is working in the best interest of the seller.
  • November 22 2009
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Profile picture for AnnieO1
I will seek representation when I'm ready, I guess my question is about this Loan Officer. Can they offer Real Estate advice?
  • November 22 2009
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I'm not sure of the laws of Virginia, so I cannot tell you for sure what their licensing requirements are.

However, when I suggest having your best interests represented, that can be by you as well. I'm not cheerleading having an agent (although a knowledgable one can be particularly helpful with bank-owned sales), but you have put yourself in a situation where the other party has all the cards. They know all of your financials and you have a lender that has outright told you he would be disclosing information to the seller that you clearly do not want them to have. From your post, the seller now knows what you can afford and that you are easily bullied. This is a near-impossible negotiating situation to recover from.

  • November 22 2009
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Profile picture for daveskow
do the listing agent and the loan officer  you are talking to  have some sort of  connection??   ( did one refer the other ?) ...if so - you should find a loan officer than might not have this connection to this listing agent
  • November 22 2009
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Dave: The lender was mandated by the listing agent in the scenario.
  • November 22 2009
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How does he know? You would need to ask him.

Can he give real estate advice? I don't think there's a law against it.

When you're ready to be represented by a lender of your choice, you can direct to state the exact dollar amount in the pre-qual letter, lower than what you are qualified.

You're not alone on this. Many buyers feel exactly the same.
  • November 22 2009
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Profile picture for daveskow
tiffany - thanks ...missed that ....

I would bail from this loan officer  and  work with another one ( even if that means losing the chance of this  house ) .....I would also  encourage  finding a buyers  rep ( realtor) that can work with you and represent your position.....trying to  use an agent that " represents " both sides is not advisable  ( unless you know exactly what you are doing .
  • November 22 2009
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Dave,

IMHO even "if you know what your doing" NOT having an Agent that has ONLY your best interests in mind, is foolish. Although, in REO Sales the buyer usually does not have that choice.
  • November 22 2009
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Annie,

What you are describing is certainly NOT an Arm's Length Negotiation.

You are being forced, literally, to negotiate against yourself by disclosing your personal/financial information!!! 

In a traditional transaction a buyer's personal information, especialy financial, is kept strictly confidential.
 
Of course, some lenders tend to think they are above the law. Some even request that the TITLE company used by the buyer is the one selected by the lender - all of that is against RESPA rules and should be reported.
 
The logic used to explain the pre-aproval of the buyer by the lender selling the property is that the lender does not want to waste their time on a buyer who might not qualify for a mortgage. They claim that there is nothing illegal about the request because the buyer is NOT obligated to obtain a mortgage from them, but is "free" to search for their own financing from other lenders.

Of course, this is a little lie, or a big one if it's scrutinizes and put under a microscope, because it enables that lender, who is also the seller, to learn a very confidential information about the buyer and strenthens the bank's negotiating position.

Your only option is to submit an offer that you think is "reasonable" and then walk away if they make attempts to manipulate you. 
   

  • November 22 2009
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Vivianne,

I think this scenario is the extreme and the fact that the lender is admitting that they are sharing the max qualifying amount against the OP's wishes is a red flag...RUN AWAY!

Having said that...If a realtor is doing everything they can to protect the seller they should require potential buyers to get pre-approved with a specific lender.  The seller is taking the property of the market and to do that with a letter from a lender that they don't know or don't trust is not really working in the seller's best interest!

  • November 22 2009
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"If a realtor is doing everything they can to protect the seller they should require potential buyers to get pre-approved with a specific lender.  The seller is taking the property of the market and to do that with a letter from a lender that they don't know or don't trust is not really working in the seller's best interest!"

Andrew,

The author of that question wrote that this is a bank owned property. Thus the bank is also the SELLER.

As for the seller having the right to pre-approve the buyer with the seller's specific lender in lieu of buyer's lender letter.... no, No, NO!

NOT, if that buyer was my client. 

Again, an Arm's Length Negociation and confidentiality of the buyer's personal information.

Think of it this way: the house is listed at $700K. The buyer's agent prepared a CMA which showed the house is not worth more than $625K.  The buyer submits an offer for $610K. The seller requests pre-approval by the lender of his choice. The pre-approval shows that according to the buyer's financial information that buyer can easily qualify for $850K mortgage. 

Knowing that the buyer can qualify for a $850K mortgage, do you think the seller is going to be willing to sell at the true market value?

NO, armed with that information the seller will try to use that information for his gain and sell as close to $700K as possible, regardless of the market value. 

You may say that appraisal would stop the seller from overpricing the house.... guess what, appraisals can be wrong...

It is NONE of the seller's business to know the financial information of the buyer.  Lender Letter from the Buyer's lender should suffice -otherwise the whole negotiation process is compromised and the buyer's best interest not fully protected.
 


 
  • November 22 2009
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"It is NONE of the seller's business to know the financial information of the buyer.  Lender Letter from the Buyer's lender should suffice -otherwise the whole negotiation process is compromised and the buyer's best interest not fully protected."

Likewise, it is NONE of the Buyer's business to know the personal and financial information of the Seller.

For this very reason, in Virginia Sellers are NOT legally obligated to disclose a short sale until they receive an offer from the Buyer - because disclosing such information would compromise their negotiating position and expose them to low ball offers.
  • November 22 2009
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Profile picture for The LaPeer Team
Many of the large banks make a buyer get a pre-approval from one of their loan officers. If the buyer doesn't, the listing agent won't even submit the offer b/c they have been instructed by the seller/bank not to. Although this practice is completely frustrating, it is what a buyer must do if they want the property. The buyer doesn't  have to go with that lender. It is in a client/buyer's best interest if the Realtor has taken the time to establish relationships w/various loan officers at these banks. In doing so, the Realtor has helped prevent high pressure sales from a loan officer who is handed business. Occasionally, the loan officer will have inside information about properties; you have to decide if he/she can be trusted.

You said you had to be pre-qualified w/a specific lender, so if you don't like that loan officer, see another one that works for the same lender. Suggestions can be made for loan officers if a certain lender is to be used, but ultimately, as long as the pre-app comes from a LO who works for the lender, you should be fine.
  • November 22 2009
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"It is NONE of the seller's business to know the financial information of the buyer"

Huh?  It sure is if they are going to take the house off the market and pass up other potential offers.

In this case, I would agree that the OP should find another lender; and possibly a new home.  But, it is in the best interest of the seller/lender to make sure they have a qualified buyer.  Lenders have been burned so bad from bogus lender letters that they are doing their due diligence. 

I have been involved with many of these transactions from both sides and the REO dept has never had discussions with me.  There is no collusion.  They just want to make sure they have a viable buyer.

However, in the scenario the OP mentioned, I would run. 

What a person qualifies for should have nothing to do with negotioations.  I will never reveal any personal information to a seller or listing agent.  However, a buyer can simply say "No".  Most buyers qualify for more than they are purchasing. 

As many have suggested, I would recommend having someone represent you to protect your interests.

  • November 22 2009
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Vivianne wrote: "It is NONE of the seller's business to know the financial information of the buyer"

Bob wrote: Huh?  It sure is if they are going to take the house off the market and pass up other potential offers."

Bob,
NOT to the point that it compromizes buyer's confidential information and negotiating position - Lender Letter from a known and a trusted lender is sufficient.

Re-read my example as to why NO Buyer should allow any Seller access to personal and financial information - because that Seller CAN and WILL manipulate the very information that Buyer naively provided to the Seller against that Buyer in the contract negotiations.




  • November 22 2009
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Viv,

If the lender provides that info against the wishes of the borrower they have committed a crime!  It's that simple....

You can advise your buyers to not speak with a lender the seller is requireing them to speak with...The seller is not required to entertain your offers!

Not sure how that would help your buyers get a property they want.
  • November 22 2009
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Viv, the REO dept has a bottom line number they will accept...period.  They typically don't negotiate on foreclosures and don't sell them above market value. 

The problem is they only trust a few because they have been burned by so many bogus lender letters.

And, as Andrew mentioned, it is against privacy policies for the lender to reveal this information without the consent of the borrower.  What a borrower qualifies for should not affect their negotiating, unless the agent is weak.  We are in a buyer's market.

It should not be revealed, but it should also not dictate the negotiating.
  • November 22 2009
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"What a person qualifies for should have nothing to do with negotioations.  I will never reveal any personal information to a seller or listing agent."

Bob, The buyer's best interests should be protected by the system with proper safeguards in place, NOT the supposed "good will" of the loan officer who represents the SELLER......


"However, a buyer can simply say "No". 
True, but by now the process was obstructed.....

" Most buyers qualify for more than they are purchasing."
You just proved my point - the seller should NEVER have access to that information - and the buyer should never have access to seller's information. 

It does NOT matter how much the buyer qualifies for as long as they can deliver on settlement day and pay the amount agreed to in the contract.

Re-read my previous example:
The house is listed at $700K. The buyer's agent prepared a CMA which showed the house is not worth more than $625K.  The buyer submits an offer for $610K. The seller requests pre-approval by the lender of his choice. The pre-approval shows that according to the buyer's financial information that buyer can easily qualify for $850K mortgage. 

Knowing that the buyer can qualify for a $850K mortgage, do you think the seller is going to be willing to sell at the true market value?

NO, armed with that information the seller will try to use that information for his gain and sell as close to $700K as possible, regardless of the market value. 

You may say that appraisal would stop the seller from overpricing the house.... guess what, appraisals can be wrong...



  • November 22 2009
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Viv,

It's not "Good Will"....IT"S THE LAW!
  • November 22 2009
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You just proved my point - the seller should NEVER have access to that information

Viv, the seller needs to know that they qualify for the home.  They may ask for credit scores and a disclosure of assets to make sure they qualify.  It happens.  They can supply or walk.   When the house is listed below market value, it may be in their best interest.

In 19 years, I have never had a REO dept ask me how much a buyer qualifies for.   I had one agent (not an REO) ask and I laughed. 

This is the first time I have seen someone (especially a REA) argue escalated appraisal values in more than two years.

And as Andrew stated, it is the law. 
  • November 22 2009
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I have a feeling Viv might be the type of REA that attempts to brow beat loan officers into providing info they shouldn't...BoB...any chance Viv is that REA you laughed at!
  • November 22 2009
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" it is against privacy policies for the lender to reveal this information without the consent of the borrower. 

Bob, nevertheless, in this case, the system is based on the trust vested in the loan officer.... who after all represents the seller..... do you see the problem the buyer is faced with?

 

What a borrower qualifies for should not affect their negotiating, unless the agent is weak."
It is true, that most lenders simply want to sell and they must comply with the federal and state laws. 

However, in a traditional sale such disclosure of buyer's financial information to the seller would make the buyer agent's job much, much more difficult - needlessly.
  • November 22 2009
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It's based on the loan officer being LAW Abiding...Not trustworthy!
  • November 22 2009
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Profile picture for The LaPeer Team
Bottom line is that if the buyer wants the foreclosure and must get a pre-approval letter from a loan officer who works for that lender, then the buyer must comply. They can talk to whomever they please as long as the LO works for said lender. And I don't think most of the asset managers are trying to hang on to these foreclosures in this market. If a buyer is qualified through them for the amount they need, they are going to take a serious look at the offer.

Prepare your buyer to jump through a few hoops in the buying process b/c that is what it takes these days to get them the homes they want. If we, as Realtors, get all uptight about things we can't change, then it does nothing for our buyers. This is one of those things that can't be changed....
  • November 22 2009
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"And as Andrew stated, it is the law."

I am glad to hear that. 

And as you stated: the buyer can always walk away from the "deal" if the price does not represent the market value. 
  • November 22 2009
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Bob, nevertheless, in this case, the system is based on the trust vested in the loan officer.... who after all represents the seller

No, in this case, my perception is the the LO is working very closely with the listing agent and not the lender; as happens in many cases.  I feel this is more the listing agent, instead of the seller.


However, in a traditional sale such disclosure of buyer's financial information to the seller would make the buyer agent's job much, much more difficult - needlessly.

God forbid the seller actually insure the buyer qualifies for the purchase of said property.  However, in a buyer's market, they have the right to say "Go Pound Sand" and buy another property from a seller with less due diligence.  In this market, it definately makes sense for the seller to not put up a wall unless they are selling below market value.
  • November 22 2009
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Cindy sounds like she has sold a few properties this year.  Thumbs up for her.
  • November 22 2009
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Annie,

In conclusion, the lenders here are telling you that loan officers must abide by the law and by pre-qualifying you (the buyer) they simply want to ensure that you (the buyer) can secure financing, so the valuable time is not lost after the lender/seller ratifies the contract.

Have your buyer agent prepare the CMA to make sure that the property is not overpriced - often REO properties sold by the banks are underpriced. Contact me personally if you'd like additional assistance. 

  • November 22 2009
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"However, in a buyer's market, they have the right to say "Go Pound Sand" and buy another property from a seller with less due diligence."

No matter what the market conditions, the listing agent's job is to protect the best interests of the seller, and the buyer agent's job is to protect the best interests of the buyer. It's that simple.  

  • November 22 2009
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NO SUGAR COATED ANSWER: Do not worry if the guy is approving your for the REO listing then he probably is telling you the truth. after all REO listings are going to get sold whether you buy or not. he is doing his job of qualifying you and part of his job is to communicate your financials to the requesting agent. He/she is not doing anything out of the ordinary. btw he/she doesn't have to have any special lic to work for a financial institution. Instead of worrying and suspecting some one that is helping you contact your agent or the reo listing agent directly and ask him to represent you. They would love you for helping their office double end the deal and that usually gets you straight answers so you could make the best decision. good luck and happy bidding
  • November 23 2009
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