Yes, it's legal. 100% legal.
The seller cannot require you to use the recommended lender. But he sure as heck can identify a preferred lender. As already noted, the investor probably has worked with the lender before and knows that the lender will finance the transaction (assuming you qualify). If you do something stupid (yup, stupid) like finding an online Internet lender, be prepared for the transaction to collapse.
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
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Realtor Coldwell Banker
The seller can counter hat they want you to use their preferred lender. Many flippers want their terms and conditions and if you do not agree, then they do not have to accept your offer.
There was a great post in Trulia on Flipping in Ca written by Lacey Fischer: Read this and make sure you do what is right for you: As this article states: "A sales transaction of any kind is a convergence of mutual interests. Despite what people believe, there cannot be one party in the transaction that has all the "power". Each party must benefit somehow, and each party must bear a certain amount of risk. For one party to ask the other party to bear all of the risk is (in my opinion) irresponsible and makes for bad business. Telling the buyer through your negotiations essentially "take this house on my terms or buy something else" is both arrogant and suspect. It fully makes me question the integrity of the seller but mostly the quality of the rehab done on the home.
If you are a buyer and you get a counter offer/addendum from a flipper, make sure you read it CAREFULLY and are very comfortable agreeing to their terms. Everyone starts a transaction thinking it is going to be roses and sunshine, but anything can happen, so PROTECT YOUR INTERESTS!
Here is the link to the full post: http://www.trulia.com/blog/livingmodesto/2012/02/don_t_get_f
Hope this helps and if we can be of further service please let us know.
Norma and Kyle
The Achievers Group
REMAX Town Center
800-525-5157 ext 0