Why won't the Realtors let us choose our own Mortgage broker?

Question

We are trying to buy a loft right now and the realtors at the sales center are now telling us that we can not have any of our incentives (which are just 1 added parking spot, and them tearing down the temporary walls that should not be in there) unless we go with their suggested mortgage broker. We have a friend that is a mortgage broker and they will give us a much more better deal. Can the sales center really do this?

Answer 1

Now if they are just unlicensed salespeople, they can do it. I doubt if they work for a builder or just a sales office that they are licensed Realtors. The Realtor code of ethics does not allow steering. Unlicensed salespeople can do whatever they want, and they usually win.

You should have a real, licensed Realtor to represent you on the buyer's side, if they arent licensed, they can lie to you like a car salesman and you could lose thousands. A good Realtor can negotiate these things for you.

Answer 2

What the general public doesn't understand is that new construction condos (or even more so with conversions) are actually fairly specialized financing.

I work with a major builder in this same capacity as a preferred lender. When I started, they weren't tying any of their incentives to using their own lender. So people would get their financing through their brother/cousin etc... And the deals wouldn't close on time, or ever. I have had to bail out so many deals where people used an outside lender, it's just ridiculous.

Most of the time, the other broker should've been able to close the loan, if only they knew what they are doing when it comes to handling the condo issues. But very few brokers have a clue. Really.

So, my builder decided that the best way to make sure the closings happened on time every time was to tie their incentives to using their lender. I have a wide base of investors who all have given me variances to close loans on new construction condos that have not been through an approval process with the major agencies like Fannie Mae. Without that approval process, most banks won't lend money on those condos. And that's likely where your broker friend will find out, 3 days before closing, that oops, he can't close your loan. It happens all the time.

And then I have 24-48 hours to get your loan done, start to finish. That's always fun, but it gets old after a while.

That being said, I am very, very competitive on my pricing. More so than I would likely be if I were actually directly employed by the builder or if the builder owned the mortgage company. I know because I see it all the time, that the builder's mortgage company rates are typically up to .25% higher than I could do. Just enough to piss off their customers, but not enough to make it worth not taking their incentive packages.

In the end, your best bet is to simply go with the suggested broker. It's between getting your best deal, or maybe trying to get a deal your friend might not even be able to close. And feel free to try to squeeze their broker on rate and costs. They may not budge an inch, but never hurts to try.

Answer 3

That happens an awful lot w/ new construction, where the builder tries to steer business through their preferred mortgage broker through incentives. Unfortuantely, they can do this. Those people in the sales office are not Realtors, with a capital "R", but just salespeople. Their No. 1 client is the builder, so they're obliged to sell you the package: home plus financing.

They detest buying agents because that means they have to share their commission. But that doesn't mean, just because you walked in and signed a card w/o a buyer's agent, you're going in unarmed. When you know their game, you know how to get past the bluster.

So, it's up to you to figure out if you'd rather have the freedom to pick your own lender vs taking what the builder offers. Having gone through the new construction route twice in 18 months, I can tell you that, when tempted with incentives to go w/ the builder's mortgage broker, I turned them down twice to get my own mortgage. Got a better deal all around (APR, terms), better than free granite countertops.

Answer 4

First, let's be clear about what "Realtor" means. A person cannot use this designation unless they are a member of the National Association of Realtors. Members are required to follow certain codes of ethics and forcing you to use a particular mortgage company isn't allowed.

However, a sales agent at a sale center is likely not a REALTOR. They are sales people, perhaps with real estate licenses.

As such, they are allowed to offer whatever "deal" they want. In this case, they are offering you a special deal (extra parking, tearing down a wall) if you finance through their preferred mortgage company. Nothing illegal or immoral about that. You don't want to go with their recommended company? You don't have to (they'll still sell to you). However, you can't get the freebies.

Think of this like a coupon. McDonald's won't give me the free soda unless I buy a burger from them. I can't say "I want to buy a burger from Wendy's, but I still want McDonald's to give me the free Coke."

Doesn't work that way.

Answer 5

The obvious answer is kickbacks. They get a deal for sending customers to the mortgage broker. The mortgage broker pays for it by giving you a higher interest rate.

Insist that their broker match your guy's rates.

Negotiate hard, and be prepared to walk.

Answer 6

More than likely the "preffered lender" is a friend of theirs or an employee of the builder. This means the incentives are offered through them. If you do not go through their lender than they can't write it into the loan.

They can't Make you go through their lender but they can take away the incentives.

Weigh the amount you are saving on the loan with your friend and how much this will cost and see where the biggest saving is.

Answer 7

Yes they can, they don't have to give you free stuff for nothing; what they can't do is to trick and tell you that you can "only" use their mortgage broker. If you think your deal is better than theirs then go with your own mortgage broker.

Answer 8

Yikes here go look
Real Estate Settlement Procedures Act (RESPA) [about closing costs & settlement procedures]: http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm
Department of Justice Press Releases on legal actions
http://www.usdoj.gov/03press/03_1_1.html
Department of Justice Antitrust issues in Real Estate (testimony)
http://www.usdoj.gov/atr/public/testimony/217299.htm
Buena Suerte

Answer 9

yes they can unfortunatly. What happens is they have a preffered lender who most likely gives them some type of commission for giving them business. When I purchased my home I went through the same thing but they offered me 30K to go with them, which i know somehow i would end up paying anyways but, I think they can do that.

Answer 10

Yes they can. In fact, home builders have perferred lenders they go through, and in exchange for the loan, they offer you perks. It's not a RESPA violation because you still have a choice in where the loan goes.