I opened escrow on a house and one of the terms that the seller had was for me to get pre-approved with his lender. I agreed but later found out that

Asked by Dave, Los Angeles, CA Fri Nov 13, 2009

the seller had access to my financial information. Is this legal?

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Deborah Brem…, Agent, Los Angeles, CA
Fri Nov 13, 2009
Hi Dave;
First of all, let me say that I'm not an attorney, so I can't tell you what is legal.
Now, let's talk practical.
It is contractually allowed, (and a common practice) when using a standard California Association of Realtors (CAR) residential purchase contract, to ask for a Buyer to apply with a lender specified by the Seller. This is expressly done to assure the seller that a lender, in whom he has confidence, has looked at your creditworthiness and is assuring the seller that based on your financials, you will be approved by a lender.
There is a clause in the Agency Disclosure which reads as follows:
"An agent is not obligated to reveal any confidential information obtained from the other party that does not involve the affirmative duties [listed in the agency agreement]. "
Those duties do not include the disclosure of the buyer's financial records. In other words, in all likelihood the agent probably need not disclose your financials.
Additionally, in the Disclosure and Consent for Representation of More than One Buyer or Seller, there is a clause that reads as follows:
"NON CONFIDENTIALITY OF OFFERS: Buyer is advised that Seller or Listing Agent may disclose the existence, terms, or conditions of Buyer's offer, unless all parties have signed a written confidentiality agreement."
Whether your financials would apply, and whether you signed the Disclosure and Consent form are items that I cannot address.
Here is where I stand on this issue:
When I interview a client who wants to purchase a home, I have them meet with a lender at the same time. I leave the room, and expressly state that their conversation is confidential. I never ask for anything other than pre- approval from the lender, as it is my belief and standard of practice that the financial qualification of the buyer is a private and confidential matter, best handled by the professional whose job it is to consult on those matters. I also include a confidentiality agreement as part of my client's offer to purchase.
I would recommend to any buyer that he/she make it clear that, in complying with a Seller's request to apply with the Seller's mortgage broker, all parties must agree to and sign a confidentiality agreement that restricts the financial agent from disclosing any confidential financial information to any of the parties.
I think that disclosing anything beyond a Buyer's qualification to purchase the property, to any party in the transaction other than the Buyer, without the express permission of the Buyer, is a breach of confidentiality on the part of the lender. I include in that statement the release of FICO scores, etc.
Sorry for your experience.
Best of luck in your purchase.
Deborah Bremner
REALTOR
Certified Short Sale Professional
Coldwell Banker Brentwood West
11999 San Vicente Blvd. Suite 100
Los Angeles, CA 90049
(D) 310.571.1364
(C) 310.422.4288
(F) 310.820.1457
http://www.TheBremnerGroup.com
debbiebremner@themls.com
Blogging at: http://TheBremnerGroup.com/blog
0 votes
Richard Leci…, , Tucson, AZ
Fri Nov 13, 2009
Usually the seller may see a LSR. Loan Status Report showing you are pre-approved. After that he really should not see anything personal.
0 votes
Jane Peters, Agent, Los Angeles, CA
Fri Nov 13, 2009
Sellers' agents often require the buyer to be pre-approved with their lender. It would not seem appropriate to share your actual paperwork with the seller, but they are entitled to know your credit-worthiness. You would need to know if your actual financial paperwork was given to the Seller directly which there is no need to do. Proof of funds is often asked for by the Seller's agent and you can black out sensitive details.
Web Reference:  http://www.homejane.com
0 votes
Mario Villag…, , Burbank, CA
Fri Nov 13, 2009
Dave,
What you share w/ a mortgage broker, bank, or real estate agent is supposed to be confidential, unless you expressed your consent to share your information. My understanding is that listing agents have their lenders whom they are comfortable using. They are supposed to cross qualify and let the agent know if you can qualify for a loan, not share your information. I for one don't like this practice. I feel that agents need to be educated enough and put in the effort of either calling your lender and figuring out if you truly qualify. Your lender of course should have your permission to discuss w/ the listing agent. I am not an attorney so can't tell you if you have a claim or any damages of any sort. Do not lose confidence in the process cause although he violated your trust, I'm sure that they are just trying to make sure that if you do end up in escrow that you don't waste your time along with the seller's.

Good luck and I hope you at least get the home,
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