Keith Kaser's Discussions

You can avoid these problems if you work with a broker or lender that will not only prescreen these prospects for you, but also have them preapproved - after they provide income and asset information, and a look at their credit. Do yourself a favor and either get all your prospective clients preapproved before you take them out, or as early in the process as possible. You should only work with qualified prospects, or as you found, you risk wasting your time.

Here is a pretty good summary of the key points of the new Housing Bill signed yesterday and in effect 10/1/08. http://www.bankrate.com/brm/news/mortgages/housing-bill-20080725a1.asp

Some lenders have decided not to list appraisal cost because it is a "third party cost" not set by the lender. Other lenders and brokers can or will use "lender premium pricing" to pay this and other loan related costs for the borrower - thereby lowering the total loan expenses as reflected in the quote. The problem is that the prospective client does not know which it is, when looking at the quote summary, leading to an inaccurate comparison of lender fees. Further they may not know of this added expense, unless it is specifically mentioned in the lender comments. I would suggest the Zillow policy be changed to: 1) Require estimated appraisal cost to be mentioned as an estimated cost, if the borrower will be paying it, or with the Zillow stated policy being that if it is not there, the lender will pay it.   ...or 2) Require it to be listed, or not,  but have a checkbox indicating if the broker will be paying it for the borrower. If it was being checked as paid for them then it may, or not, be shown, but in any case would not be included in total lender fees, thereby making the summary quote comparisons more accurate. The system as it is now leads to confusion as to what the borrowers true costs are, and gives a competitive advantage in regards to "lender fees" to those who currently are not listing it ...but also are not paying it for the borrower. This becomes an "O by the way" fee in the posted quote at best ...and an undisclosed cost at worst.  Users of Zillow, both Borrowers and Lenders, deserve better transparancy for both consumer disclosure reasons, and a for a fair comparison of offers among lenders. 

I agree. Either put it on there, or pay it ...simple as that. Anything else is either blowing blue smoke, or seeking to gain competitive advantage. Since we do have some control as to who will do the appraisal, and can shop that fee to the benefit of our customers, our quotes should contain a reasonably accurate cost estimate for this required fee, if the borrower is to pay it. (And not $300 for a $1 million+ home either) It's all about disclosure. More is always better.

Gregorio, Thanks for the heads up.

You will not likely be allowed to receive a rebate larger than your total closing costs. If your lender allowed an amount beyond this, they would probably reduce your loan amount accordingly, and you would still have to prove you have sufficient down payment exclusive of those additional funds. As a real estate and mortgage broker in CA since 1994, and agent 7 years prior to that, my take on this issue would be that any commission rebate from any real estate agent in the transaction should simply be contained in the real estate contract. Lender gets a copy, buyer and seller signed it, everyone is on notice. It should also be listed on the HUD and can be used only toward closing costs, not down payment. It would also be included under the lenders limitations of "interested party" contribution guidelines.  Undisclosed cash paid after closing would raise many issues, however in my opinion, payments outside of closing should be acceptable - with full disclosure to all parties of the transaction, and acceptance by the lender.  I personally do not believe in money or other incentives be paid outside of escrow. But still, what mortgage broker hasn't rebated a borrowers appraisal fee, at some time, after close. Also consider a real estate agent who might pay for a home inspection, Same difference really, but that is still technically a direct reimbursement for a closing cost, not cash proceeds. Full disclosure such as described, must be the way the companies that do this would likely operate, and should be acceptable ...as it is now being done. It is not likely to be going away.

To determine for yourself the relative value of buying down your rate with additional loan fees: 1) Compare the difference in principal and interest payment between one rate and the other. 2) Divide your additional cost to get that rate, by the monthly payment difference which gives you the # of months to recover your additional paid cost. This is your breakeven point (not counting the lost revenue if this additional cost was invested, or "lost opportunity cost".) 3) Once you pass the breakeven point, each month that payment difference is additional savings to you. Multiply that difference gives you the $$$ amount saved per year, as long as you still have that loan. 4) If you sell or refinance before the breakeven point, unless you really needed that lower payment, (fixed income etc.) you would have been better off with the higher rate and less cost. Generally I have found a very good breakeven point to be in the 33-42 month range. Most average 60 months or more, and I feel that is a stretch for most people. A lot can happen in 5 years. For most people, unless the extra money is available, a lower payment is necessary, or unless you plan to keep the home a long time, buying down the rate may or may not be the best option. When deciding on a rate and cost, calculate your own breakeven point and see if it makes sense in your situation.

Realtor referral programs are here to stay and you can expect them to become even more common. That being said, they have not, as yet, changed the way most buyers select agents, or how loans are being priced. To price in a "potential" buyer rebate, however much disclosed in the comments (and he does a better job than most) should  not be a part of a loan being quoted on Zillow because all of our quotes are required to be about the buyers true cost of financing, as based on their profile - without additional conditions. Some lenders here are also real estate agents, or work with others who offer these programs. That is fine, and another potential benefit to buyers, however these programs should only be mentioned as available in the comments only, and as, at best, "potential savings" and not assumed nor reflected in the quote.  In the real world someone who may offer these programs should "ask" the prospect if they have already formed an agent relationship before offering any sort of "inducement" to do business with them. This will help prevent any awkward conversations with that buyers existing agent. To not do so may be considered interference in an existing buyer/agent relationship, and in California at least, a potential breech of the Realtors Code of Ethics, if done by a Realtor. Bottom Line - Discounts should not be included in any Zillow quote unless they are available to all without any additional conditions. (such as use me/ or my referred agent)

There is always a slowdown of acvtivity in real estate this time of year as people are getting their last vacations out of the way and annual back to school routines. If the past is any indication we will likely see a (usually very short) window of very attractive rates, in part due to reduced loan volumes, over the next 2-3 weeks. Things usually pick back up by mid September and should remain steady till the latter part of October, when it will probably fall off til after the election. That's what the tea leaves are saying at least ... ;-)

I have posted elsewhere ( I do not recall which site) that had the type of limits mentioned here and it worked quite well. The programming could even be set up to work automatically off a chosen lenders datafeed(s). It would finally weed out the worst offenders, and may be the only ultimate hope of curbing the quote abuse that does go on. It has to stop somewhere, and a system wide solution would be best, because without limits, people will continue to try to game the system making it a less reliable option for Zillow users.