August 9th, 2012 3:50 PM by Andrew Walter May
Called CBA's (controlled business arrangements) Realtors and Builders have always pushed their own inhouse mortgage lending options, restricting your freedom of knowledge (afterall, they are all on the same paycheck....the loan officer, Realtor, appraiser, builder, all waiting on you to say, "Yes").
While it sounds nice to have all the services in one office, so convenient.....the reality is there is no one on your side. No "fiduciary". A broker, by law, is your fiduciary. A lender, not so much. So, what should you do?
First, get educated and google the following, "BUILDER COMPLAINTS". You get 7.48 MILLION hits. Wow...what about it though. Can't builders and Realtors offer me a better overall deal if they bundle everything together? While it's possible, they usually hire an 18 year old to push what they are selling (usually, that is). If they contract out with a broker, then at least you know you are getting a licensed professional (and I'm not talking about simply a registered loan officer.....which all loan officers are required to do. Registration is - "Hi, my name is Sandra and I'm 18". That's pretty much it). Go with a bonded, insured, highly regulated broker (not an unregulated bank - remember, states like you know, all 50 states, do not regulate bank mortgage companies).
Here's a good story and link on the issue....http://www.washingtonpost.com/wp-dyn/content/article/2007/04/21/AR2007042100094.html
What should you know? What are the top 5 mistakes you'll make when using a builder owned or realtor owned loan officer?
Top 5 Mistakes you'll make using a unlicensed 18 year for your loan officer:
Number 5 - you'll overpay on the new construction. It will be like negotiating for a boat, car and house at the same time (Realtor buy/sell side commission - which they will try to take both sides, loan officer commission where they don't tell you a lot, and the upgrades. Many people give up and lose their earnest money). The 18 year old that is pushing the mortgage onto you won't necessarily be licensed and probably only has experience "owning" a home through their parents. You know, "I once lived in a home" type consultation.
Number 4 - You will likely see great depreciation due to a) the transient nature of unstable new construction b) the neighbor next door that moved here and lost their job (as opposed to a stable neighborhood) c) chineese wallboard (ok, that's a little scare tactic there. Not nice). d) Just like buying a new car off the lot, only worse.
Number 3 - Who do you trust? I'll leave that to self-explanation.
Number 2 - Some Realtors and Builders have 6 figure deals with their in-house lender. They pay their employee (remember, the potentially unlicensed 18 year old) minimum wage plus a sandwich if they close you....and keep the difference. I've known several prominent Realtor/Builders that charge over $100k to steer you to the inhouse person. Guess who covers that little nugget? You do.
Number 1 - You're educated. Pair up with someone that isn't a former teller at a bank. Get someone on your side that knows the business. Afterall, it's your money. Why not hire the best. Hire a broker. We're all licensed, bonded, insured, tested, credentials out the wazoo....
Thanks for your business and time. 2012 is an election year. Don't drink too much of the coolade, we'll be back into the economic morass starting in 2013.
23 years of mortgage lending experience