What if my buyer doesn't want to use a local lender?

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Most buyers will follow your lender recommendation. However, there will always be buyers who want to find their own lender. It's a reasonable decision when you don't understand the true landscape of mortgage lending. Buyers who want to find and use their own lender generally have one or more of the following misconceptions:

  1. They think that they'll get favorable terms from their retail bank or they think the process will be easier because this bank already has their accounts.
  2. They've seen misleading marketing that shows more favorable rates than can actually be obtained.
  3. They think some other lender can provide better rates and/or terms.
  4. They think there is no downside to using a lender from another market.
Over many, many transactions with retail lenders (Wells Fargo, Bank of America, Chase, etc) we know that you will almost always have a bad experience. These banks don't pay their mortgage lenders very well, so any good lender who starts there leaves pretty quickly. We have lucked out and worked with LOs who care and who are responsive (many are unresponsive and don't care), but we still have to muddle through their underwriting department. Most of the time, retail lenders close late. There is absolutely zero benefit to use these banks if you already bank with them - none. It seems counterintuitive, but this is the case.

If your client has seen terms that look to good to be true, let them know that you think that is the case. Recommend that they get a formal quote (so we can all see if this is really the case) and to then compare that rate sheet with a local lender.

Sometimes, a lender from out of state will provide a misleading rate sheet. There are fees that they have to estimate that aren't set in stone (examples are title fees and property taxes.) If the lender underestimates these fees, then their rate sheet will be misleadingly good. Recommend that they send this rate sheet to a trusted local lender to confirm. Any great lender you work with will have no problem saying, "I can't beat this" if it's truly great.

There are plenty of downsides to using a lender outside of our market:

  1. Great lenders provide a smooth transaction and a much more pleasant experience. A much lower % of lenders from out of market are "great lenders". They have very little downside to providing a poor experience and many of them just don't care.
  2. Lenders from out of market have no local reputation to protect. If they muck up the deal, you'll never work with them again, but they don't expect to ever work with you again, regardless. Local lenders fiercely protect their reputations. Agents have long memories when a local lender closes late or provides a bad prequalification, so local lenders care deeply about closing on time and providing good pre-approvals.
  3. Close on time? Is that a big deal? Yes, absolutely. If you don't close on time, then it's likely that you will have to put down additional earnest money and/or pay a per diem (daily money the seller is losing due to the late close.) While it's unlikely, you can sometimes lose the house if the deal closes late.
  4. When you present an offer with a pre-approval from a lender from out of market (or from a big retail bank), you are instantly putting yourself at a disadvantage. Because of points #1-3, listing agents really dislike working deals with lenders like these.
***Eric to record a video***
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Christopher Penaloza

Christopher Penaloza

JC was very helpful during the process of buying my first home. He directed me to lenders that truly had my best interest at heart. I almost made a few bad decisions that JC was there to wave off for me. I truly appreciate JC's responsiveness to ALL of my many questions and his willingness to be a sounding board for my frustrations in the process. I still hear from JC from time to time ensuring that I am happy with my home and letting me know of up and coming business in my area that might affect my property value. I will absolutely be using JC to purchase my next home.
LanceLunsford

LanceLunsford

JC does a great job with attention to detail and ensuring he has answers to your questions as you navigate the process of a home purchase. JC understands the process of the transaction in a home purchase and makes sure the details are covered.
Christopher Dunn

Christopher Dunn

Ruth helped us to view many houses and (over months) to make multiple offers in a really, really tough market for buyers. Our low bids were our own fault! Ruth's guesses are always spot on. We finally had a bid accepted last month, and Ruth helped us re-negotiate after significant problems were discovered. Ruth has gone above and beyond for us, giving us far more time during this long search than we could reasonably have expected. She even helped us look for a rental when we'd basically given up. Her advice has always been immensely valuable and brutally honest. She is the most knowledgeable agent I've met on the Central Austin market. She also handled our stress well, and believe me, buying in Austin right now is stressful!
Jerry Nash

Jerry Nash

Excellent service and follow through. Very professional!