On one of my deals recently, I was having a difficult time getting the HUD and my title company said the lender tells the buyer how much they have to bring and it's not really necessary that I view it. Well, I say to myself, I must be overdoing it a bit and need to relax.
Lucky for me, with my most recent closing, another title company sent the HUD over with the closing papers. This closing was for first time buyers, 100% financing and with 6% closing costs. They put $1,000 earnest money down and had to come to closing with around $200. I always tell my clients that I am not a mortgage lender and I have several I would be happy to recommend (I did not recommend theirs).
So, even though I don't specialize in mortgages, it seemed to me that they should have money coming back. I took it to my broker (it wasn't with the closing papers he reviewed) and he immediately saw that they were paying about $5,000+ for points. All I have ever heard is that it doesn't pay to buy points-and their rate for an FHA loan wasn't really any different than a conventional. My broker said it was really too late but he would say something to their lender.
The lender said that one of the fees was because something was changing with FHA that we had to close by Friday or the rate went up and we were closing on the following Monday-and (he said) my clients insisted on FHA. The importance of a closing day was never communicated to me and I was furious. I told him that had I known it would cost them a couple thousand dollars, it would have closed on Friday. He offered to explain all this to my broker. My broker was very busy but agreed to speak with him. A little while later, my broker came by and said the lender said something to the effect that he did not have to explain his job to someone's broker. I thought he welcomed the idea-hmm? Anyway, a short time later, the lender called to say he was eating those costs and was giving them their earnest money back and wanted to make sure I told my broker-hmm. Plus, my clients later said they didn't care if it was conventional or FHA-that was what he recommended.
Early on I had a concern about their choice of lenders but they had paid him $250 or $300 up front and felt locked in. He was their choice and I didn't have any specific complaints so left it at that. Needless to say, hindsight is 20/20. It sure made me realize that not all lenders are trustworthy (my first experience like this) and the more I can go over, the better to protect my clients. I love working with first time buyers-how exciting, nervous, trusting and fearful it can be purchasing a first home. They would have been better off losing the $300 to gain more in the end-I am just thankful that they got their earnest money back. This experience really made it crystal clear as to how important it is to trust the person who refers you to someone and the importance of my choice of who I refer.
Royal Oak Realtor selling Real Estate in Southeastern Michigan. TishHouse sells Houses - selling Oakland County Real Estate with RE/MAX Showcase Homes in Birmingham, Michigan. Helping People in a challenging market by specializing in Short Sales. See what my clients have to say about my extraordinary customer service.
It is best said to work as a team...each independently doing a professional job to ensure that the client is getting the best service, best home for the price, best location, best rate, best closing costs, closing on time, closing without surprises, closing with a smile on their face and peace in their heart and mind, etc., etc.. The best advertising for me is a past client - hopefully now a client for life.
It is imperative that realtors and lenders work on the art of referral and not be shy'd away from someone being pre-approved somewhere else. A free pre-approval may show a better opportunity for the borrower, and perhaps their first mortgage consultation was the best. If you are ethical and honest, truly working for your client, you need not fear other lenders unless they use bait and switch techniques.
If you are working with a "professionals" you need not worry about surprises and/or mistakes on a HUD.
Chuck:
I have never felt I need to protect my clients from lenders until this happened. There were so many red flags culminating to being charged over $5,000 for points on a loan of less that $145,000. Early on, when they said they paid about $300 to their lender, I left them alone with their decision. Had I not seen the HUD (by chance) and asked my broker about it, they would have lost $1200 dollars that they really could not afford. I will always err on the side of trusting people rather than going around looking for the worst -- I am just grateful that theygot their money and I value to great referral relationships I have created.
Joyce:
These clients were referred to me by someone I helped purchase a home. They were complaining about their Realtor not doing a very good job for them and my past client told them to call me. In fact, I just remembered that their lender was acting as their Realtor (part time)--doing both. So, I am always providing service that will create a client for life. And I want to work with similar people--lenders, title companies that are doing the same.
Missy: When I asked them if they had REALLY insisted on FHA, they said no--it was what their lender recommended. It was the lender's idea to explain the change in FHA rates that took effect before we closed with my broker. When my broker said he got agitated with explaining, it told me that something was off. I had never had to watch out for something like that with my buyers before. Plus, he was very concerned that I tell my broker that he had taken the costs off--mentioned that a couple of times.
Cathy,
There are plenty of rip-off artists out there. Representing a buyer, it is your job to protect your naive clients from such unsavory characters.
Stefan:
My sister inspired me to be a Realtor and early on, I was negotiating a deal and was suspicious of the other Realtor--and really for no reason but thinking I had to really protect my client. My sister told me something that I have always remembered. She said it was her experience that everyone is really working to have a win win situation for all concerned. And, for the most part, I have always found this to be true. I think AR is a great example of that--so much help and networking--and it doesn't matter which Real Estate company we represent. So, this was a bit of a surprise--not that I am naive about the world. It doesn't change my philosophy or approach to the deal--but it doesn't hurt to verify. Thanks for stopping by to comment.
Trying to be the best in our professions, means picking a profession. When I started in this business in 1996, I was a licensed realtor and mortgage professional. After the third dual transaction, I determined that I could not do justice to being a "top notch professional" in both the real estate and the mortgage industry as there are continual changes in each to stay abreast of. Uncanningly, I also did not feel comfortable ethically to be "doing it all". Having experienced both opportunities, and truly enjoying both. It is wonderful to be a mortgage professional as that is what it's all about for me..."A home loan is more than just a loan, it's the way you live your life".
Joyce:
Thanks for reading my post and I agree with you - I cannot imagine keeping up with both and fully taking care of a client like they need and deserve. I am constantly learning something new every day and appreciating the trust people are putting in us in one of the most important decisions they make. You are definitely represent the type of mortgage professional I want to work with.
Hey Cathy,
I just read your blog about the FHA client/choosing their own lender nightmare! Ohmygoodness, what a shame (or, sham, I guess I could say.) I'm gonna wag my finger a little bit, as a competent Mortgage Planner. You obviously have good business practices as well as good managerial support. Use stories like this with future clients when they want to use somebody you don't know. Obviously, you can't insist that they use a lender of your preference, but you can insist that, for their protection (as well as your own) that they at least talk with a lender you know and trust. This will do three things: 1) You will learn from your lending partner what real capacity the buyer has, 2) Your clients may find that your partner is a better alternative to their prior choice, and 3) you will have added much value to your partner (and your own ability to get safely to the closing table) by having pointed your clients to a competent partner.
Great blog on the dangers that abound, and an unfortunate testament that there are truly some bad people out there in my profession.
Much future success to you!
Greg:
Thanks for your comments and for being a testament to what it looks like when you are a good Mortgage Planner. I will definitely use this story when I come across someone who does not have at least one second opinion or good faith estimate. I always give at least two names and tell them to speak with both and always get a second opinion. That is pretty much true of anything these days.