Home Buying in Woodinville>Question Details

Carrie, Home Buyer in Woodinville, WA

Is it legal for a builder to require selection of their preferred lender or pay $250 fee at time of offer?

Asked by Carrie, Woodinville, WA Fri Dec 5, 2008

The builder has required me to declare if I am using their preferred lender or not at time of offer. If I don't use them, then there is a $250 fee. And if I do not close on closing date, then there is a $250 fee per day not to be closed. But since the preferred lender only gives a GFE and not a guarantee, they are unfairly trying to force me to take whatever terms they give me on the day of closing. I just don't think this sounds legal, but the building company is owned by a law firm.

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Carrie, it's your mortgage and it should be your choice. If this is a "must have" home for you, your agent can always submit the offer stating that you will not pay any $250 fee. I think you've answered your own question--it's totally unfair. How do you know if you're going to receive a fair rate/fees if the service is controlled.
0 votes Thank Flag Link Mon Dec 22, 2008
One other compromise solution is to have a clause allowing the builder's buyer to be a backup lender. We've considered doing that on our listings where we didn't quite feel right about the buyer's agent or their approval letter.

Basically the additional prep work allows the backup lender to step in quickly if the first loan can't fund.
0 votes Thank Flag Link Sun Dec 7, 2008
Given the advice provided by my contemporaries, my only thought concerns your relationship with the builder after you close. Their conduct, legal or not, may be an indication of how they handle customers. As said before this is not a time for builders/sellers to be inflexible with such demands. At the sake of sounding like a broken record, make sure your realtor has experience with builders' contracts/negotiations and don't be hesitate to consult a lawyer before you sign (if possible). S/he might be able to make appropriate changes to the contract to protect your interests. What if the builder doesn't perform certain duties causing a delay in construction. How are you compensated? Your realtor might be able to refer you to a good attorney. I might add it is a tough economy and the builder has to take steps that help them guarantee their survival. If shoring up the financing process helps them better forecast their expenses and revenues then it's only smart business. That doesn't mean you have to accept it. Good luck.
0 votes Thank Flag Link Sun Dec 7, 2008
It probably is legal but that, as already stated, is a question for an attorney with all the facts at hand.

I wholeheartedly agree with Kary. There is plenty of inventory and it is a buyer's market. But if the builder is truly infexible and this is truly THE property that you want, $250 may be a small concession to make.

If you don't have one, I highly recommend hiring a good Realtor to look after your interests.
Web Reference: http://www.homehounds.com
0 votes Thank Flag Link Sat Dec 6, 2008
Well I am not a layer, but I have been is several deals on both sides of the transaction where clauses like this are used. I know of several builders like Eastridge that use them. They also use the inspection 35b verse the regular 35. This is their way of trying to tighten up the deal. Hopefully your agent will help you through the process and make sure that the builders addendum does not put you in a spot where it make it difficult for you to perform.
Web Reference: http://www.shopprop.com
0 votes Thank Flag Link Sat Dec 6, 2008
I'm not sure I would worry if it's legal. Just don't agree to those terms if you don't like them. It's December, 2008. You have the power. They don't. If they don't like your terms, find some other place.
0 votes Thank Flag Link Sat Dec 6, 2008

See this for what it's worth. They are trying to corner you by using pressure tactics. If they can convince you to get approval from their lender it will minimize your ability to escape from the agreement based on lack of funding.

As a legal issue, it would be best responded to by an attorney but from a practical point, these are strong arm and controling tactics.
0 votes Thank Flag Link Sat Dec 6, 2008
I looked back through some previous note from a meeting at our office and here is some additional information I can share with you that was given to us -- but again, if you have an executed contract you may want to seek the advice of an attorney.

Apparently, there is no legal prohibition on a seller/builder requiring a buyer to use a specific lender as long as lender and seller/builder are not “affiliated businesses.” An affiliated businesses arrangement would be where the seller/builder owns part of the lender (more than 1%). Even then, disclosure of this arrangement to the buyer might allow the seller/builder to avoid a RESPA violation. A RESPA violation MIGHT be present if the seller/builder receives a financial incentive to send buyers to lender and charges other buyers a penalty (or holds back an incentive) because they do not go to builder’s lender. There might be an anti-trust problem for the seller/builder in this situation. A “tying” arrangement might exist that would violate state and federal antitrust laws. A “tying arrangement is an agreement by a party to sell one product on the condition that the buyer also purchase a different and “tied” product.

Hope that helps......
Web Reference: http://www.key2yourhome.net
0 votes Thank Flag Link Fri Dec 5, 2008
One question I have is:

Is there preferred lender affiliated with the builder (in other words does the builder have a vested interested in the lending company?)........

And to answer your question regarding the fee per day....yes, they can charge a fee of there is a delay in the closing date and it is not uncommon to see this. But the delay must caused by something to your fault (i.e. YOUR lender can't close on time, docs aren't at escrow on time, etc.) but it depends on the language within the contract. Do you have an agent who represented you? Have you signed a contract yet?

Feel free to call me. I have extensive experience in New Construction, work in the Windermere Woodinville Office and am happy to help any way possible. I cannot offer legal advice, obviously....but if you are not yet working with an agent and are seeking representation I would be happy to review the contract or be sure that your interests are well represented through this process.

Also curious, if the builder has an agent who is representing their side of the transaction?
Web Reference: http://www.key2yourhome.net
0 votes Thank Flag Link Fri Dec 5, 2008
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