Should I get pre-approved by a bank that holds a foreclosure property for sale?? Even though I'm approved by my mortgage Co.??

Asked by Ron Blaken, Santa Rosa, CA Mon Oct 19, 2009

A bank owned property owned by a certain bank wanted me to get pre-approved with them to make sure I could purchase... my brother is in the bank business back east and said it was a way for the bank to determine if I could pay more... should I let this happen? or is this just more bankers bs tactics..

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14
Mike Kelly A…, Agent, Santa Rosa, CA
Mon Oct 19, 2009
Think of it as a strategy to separate YOUR offer from the pack! In our area many REOs hit the market generating 5,10,15,20 offers! If you come in at a "supportable" price with the loan going to the REO Bank you might have a strong edge over everyone else who wants to use their "friend or buddy"! I recently had lunch with a Sr. VP at one of the major banks now selling foreclosed properties or REO's (real estate owned) and he frankly admitted getting the loan during the REO process is a big plus for them!
Where many Realtors/Agents think it's a pain to get "pre-approved" all over again they MISS ENTIRELY the strategy and significance of using the BANK WHO OWNS the REO as the lender for this particular deal. I advise my clients to USE whatever bank has the REO property. The rates are NOT that dramatically different with most of the big boys able to beat everyone out there!
So instead of thinking it as "bs tactics" why not WORK IT to YOUR advantage. If your Realtor/Agent can't see this then get a seasoned Realtor who KNOWS and WORKS with the REO Realtor/Agent and BANKS! Opportunity exists but you've GOT TO HAVE A STRATEGIC PLAN.
On my weekly Real Estate Talk Show in Sonoma County, my associate Allison Norman and I address these "strategies" with our listeners. Tune us in! Sundays, 9 to 10am, PST, http://www.KSRO.com or 1350AM.
1 vote
Diane Rooney, , Santa Rosa, CA
Thu Nov 26, 2009
Alot of the banks that hold properties for sale are requiring potential buyers to get pre approved by them. This is letting them know that you really can qualify to purchase the property should they choose your offer. It does not mean that you need to use them, but it does give you a second opinion and option. Some loan agents will email your info to that particular bank to save you time and the inconvenience of filling out paperwork again. They do realize that they could loose you as a client but they do this as a favor to the real estate agent and the buyer. Thank you. diane.rooney@century21.com
0 votes
Anthony Ebri…, , Sonoma County, CA
Sat Nov 21, 2009
Mike is right. Your Realtor should do everything he/ or she can win the bid for you. He's seen a ton of transactions and knows how to play the game to win.
0 votes
Mike Kelly A…, Agent, Santa Rosa, CA
Sat Nov 21, 2009
Once again to reiterate--your Realtor/Agent owe YOU a fiduciary to represent you to the best of THEIR ability and that means getting you a house. Granted, we all work with lenders we like, trust and have great friendships--however, I am here to get RON, not my mortgage buddy, a HOME. In this extremely competiive field I need EVERY edge I can get for YOU the prospective homeowner. Writing into the contract initially, "Buyer to use owner's Loan Representative" be it BofA, Wells, etc, gives you THAT edge! Also, when you receive a "highest and best" and respond to it, write in long hand the SAME statement as THIS IS THE ONE the Asset Manager will see BEFORE they ever lay eyes on your contract!!
I know many of the lenders who have resonded to this email--Anthony is a fabulous loan guy, but when it gets down to my client realizing THEIR dream--I defer to that. My fiduciary demands it.
0 votes
Anthony Ebri…, , Sonoma County, CA
Sat Nov 21, 2009
Ron, It looks like you have plenty of great answers already. I have worked in the lending industry for 18 years and have been both a broker and banker. I have to agree with some of the comments here: it's best to work with the lender that you trust. You are not required to use the lender that holds the property, but it doesn't hurt to see what they have to offer. I just closed a loan that saved my buyers a full point in fees. It was a pre-approval for a bank owned property that I did for a buyer who already had the loan "pre-approved" with her lender. She was thrilled about saving the money.
0 votes
Dan Chase, Home Buyer, Texas City, TX
Sun Oct 25, 2009
Being pre-approved by more than one lender means you can lose a loan and still buy the place. Often a person thinks they ahve a loan and then finds out their lender died. So it makes sense to have a backup plan. You did not say the bank insisted on you going through them to buy, only to be approved. I would think it is cheap insurance.
0 votes
Jennifer Bee…, Mortgage Broker Or Lender, Corte Madera, CA
Sun Oct 25, 2009
Hi Ron,
Banks do not require pre quals to hustle you out of more cash. Banks require preapproval through their guys for two main reasons.
1) They want to make sure you are really qualified. You would be surprised how many people are not and still have pre approval letters from lenders who do not understand current loan programs. They want the in house guy to make sure that if the deal blows up with your lender they can salvage it. If they say your approved and then your deal blows up and they can't save it the bank is not happy. They are taking the property off the market when they accept the offer, they want to make sure it is a sure thing.
2) They want a chance at the loan. You do not have to use them for your loan but they will compete for your business.
At the larger banks the loan consultants doing the pre quals do not talk directly with the asset managers. If you want the house you need to play the game. Call the bank, get pre approved and then use the lender you were planning on using:)
0 votes
Dallas Texas, Agent, Dallas, TN
Tue Oct 20, 2009
Many banks will decline any all sales offers IF you are not approved by those banks. Even if you specify upon approval of accepted offer bank can pre-approve you.

I would name the banks who are involved in these activities which I find unfair to any all parties. My comments would be consider slander NOT UP TO LAWSUIT....

We instruct our clients while searching for properties EITHER SKIP over these properties NOT approved or show then have go thru that process.

It also allows banks establish a NEW POTENTIAL CLIENT

Been a major issue for many Realtors across country.,

In some listings lender may not accept VA or FHA loans your offer would be declined.

Many Realtors now step away working with foreclosures due to issues such as your question

Pre-approval letter provided from a buyer starts eliminating home tours because of restrictions in MLS postings.

National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
Follow me on Twitter: http://twitter.com/Lynn911
Lynn911

http://www.lynn911.com
0 votes
David Pittman, , Sebastopol, CA
Tue Oct 20, 2009
Well Ron your question generated some great answers.
Some banks are requiring that the persons offering on their REO's get pre-qualified by their bank employed loan officers. Some banks do not require this. Getting pre-qualified by the REO's bank does not mean you have to use them for your financing and it doesn't mean they will actively pursue you for the loan.
My experience has been that the bank wants to be sure that you really are qualified to perform on the purchase. I guess on occasions buyers have pre-qualification letters but really aren't qualified. Yes there are still loan consultants around who don't do their job well.

Work with a realtor and a lender that you trust who know the answers to your questions.

Pre-qualification means a lender has gathered your financial information, credit report, W2s and other information necessary for them to determine that you have the funds for the down payment and closing costs and that you have adequate income to meet a lender's guidelines for debt to income ratios with the new house payment added to your other financial obligations. A loan consultant can perform this service for you is a matter of hours.

Pre-approval means that the above information and documents have been submitted to an actual lender who has then had their underwriters go thru your submitted file and the lender has issued an approval. They will make you a loan on an acceptable property. This process can take from 2 days to 2 weeks depending on circumstances.

It is a competitive market these days with the small inventory of properties. Good luck in your pursuit of home ownership.
0 votes
Robert Spino…, Mortgage Broker Or Lender, Mill Valley, CA
Mon Oct 19, 2009
Ron,

I may be in the mortgage business and therefore a bit biased, but I always suggest that if you have any choice, you work with those you trust the most. If you're confident in, and pleased by the service of, your current mortgage company, stick with them. The offers will come and go in this market, but it's much harder to replace integrity and someone who is looking out for your best interest.

You know more than you think,

Rob Spinosa
RPM Mortgage
rspinosa@rpm-mtg.com
0 votes
Susan Bryer, , 95472
Mon Oct 19, 2009
Hi Ron - I understand how being required to qualify with a specific bank could initially be a bit unnerving, and also, that qualifying with individual bank representatives every single time you want to make an offer on a bank-owned house can get very cumbersome - however - the banks are usually requiring that you go through this process for two business reasons:

1. Yes, they're in the mortgage business and they want the opportunity to court your loan business with their own incentives, etc. since they're almost certainly losing money on the foreclosure sale - and

2. Yes, they want to have their own appointed and trusted representative review your financials so that they can be certain you are qualified for the purchase based on their guidelines.

If a listing for a bank-owned property instructs the buyer to be preapproved with "Bank X," then my recommendation would be to just do so post haste and not let that stop you from pursuing a house you want.

Feel free to call me to discuss more if you wish!

Best,
Susan Bryer
PS: Here's a link to a recent newsletter I wrote re: short sales and reos:

http://medialaxb.rapmls.com/norcalmls/listingpics/disclosure…
0 votes
Kay E Marquez, , Santa Rosa, CA
Mon Oct 19, 2009
Yes, the REO banks want to make sure that they are dealing with a qualifies buyer and many times they do not know if the other lender has prequalified or preapproved the offeror. It does not hurt to get a second opinion and you can always use your preferred lender, but of course they will try to get you to use them!
0 votes
Jessica Dodge, , Campbell, CA
Mon Oct 19, 2009
I agree with Dorothy's comment. Many times a bank will want to know that you are "credit worthy" by their standards. Your offer might also beat out some others, should you indicate that you will be using them for your financing. Right now, every little bit helps in order to stand apart from all of the others!

Jessica Dodge
Keller Williams Realty-Silicon Valley
408-838-1480
Web Reference:  http://www.thedodgeteam.com
0 votes
Dorothy M. R…, , Oak Park, IL
Mon Oct 19, 2009
Your brother is right. In this market it is not uncommon for the bank holding the foreclosed property or one involved in a short sale to require the potential buyer to be pre-approved with them. You may still use whom ever YOU choose to do your financing.

Dorothy Reid
"There Is No Place Like Home"

Baird & Warner
805 W Lake St
Oak Park, IL 60301
Web Reference:  http://www.dorothyreid.com
0 votes
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