Have your agent call the listing agent on this. This is usually a requirement on an REO and there is some flexibility, based on your strength as a buyer and who you are working with as a lender. Here is my experience on both sides of the issue, and hopefully this will clearly illustrate why having "an ace in the hole" or another lender who can close your loan is sooooo important in this market.:
1. A pre-qualification letter means next to nothing in todays market. You need to be Pre-Approved, which means you need to have submitted all you paperwork to your lender and had it reviewed by either their loan officer or their underwriter for sufficiency. Anyone can get pre-qualified by a broker or lender, however, athey are under no obligation to lend until the actual proof of income / employment / payment history is submitted and verified.
2. If you are Pre-Approved by a direct lender, most REO lenders will accept this. The problem is that too many people get pre-qualified by a mortgage broker (and they seem to hand these letters out without too much pre-thought) and then the broker cannot perform. As a listing agent, this is extremely frustrating. You have taken the property off the market, perhaps turned down other offers, only to have to start from scratch when the buyer cannot get the loan.
Here is a personal example: I had this happen with a Wachovia Pre-Qual buyer (not Pre-Approved) on one of my listings. They could not get the loan funded because they had mis-represented their income in the pre-qual process and could not provide the proof the lender required to close the loan. Please note, the property appraised for the asking price without a problem. Then once they were told they could not get the loan by their "friend" at Wachovia, the buyer did not want to cancel escrow because they really wanted the home. Unfortunately, even after we gave them an extension on time to close and they submitted applications with two other banks and two brokers, they could not get the loan. We were 45 days off market in a declining market. The home ended up selling for $40,000 LESS than this offer gone bad, almost 90 days after we were originally supposed to close, which was 45 days after the seller accepted the offer, ie. 4.5 months later on a home where the monthly mortgage payment for the seller was over $3,000 per month. If we had insisted on having their information submitted to a lender we knew and trusted we would have known about this much sooner and possibly saved a lot of people a lot of trouble.
3. An another personal example: The very first time I represented a buyer on a purchase of an REO, they were pre-approved by a mortgage broker. This was during the time when banks and lenders were failing daily. My pre-approved buyer was pre-approved with a lender who closed their doors before they funded our loan. We had to scramble to find another loan and fight the selling bank regarding per-diem late closing charges. If we had been pre-qualified or pre-approved with the selling bank, we might have been able to close on time.
Whether it is legal or not to require that you get pre-qualified by their lender is a question for an attorney. My experience right now is I have all my buyers "double app" or get approved by two lenders at the same time. This way, if their first choice cannot perform (which happens about 25% of the time right now), or changes the terms of their loan at the last minute, they can still buy the home they wanted.
Hope this knowledge helps to ease the pain of the process in these uncertain times. I am sure that your home and your loan are both out there waiting for you. Dare to Dream.
Real Estate Consultant
RE/MAX Palos Verdes Realty