How much do I trust my realtor?

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How much do I trust my realtor?

Emily Shirk
San Jose, CA · Member since 2016 · 13 posts · 1 vote

Hello!

My husband and I are first time buyers and new to the area (San Jose).  We met with a realtor who I found on zillow with high ratings and she instructed us that because the housing market is so competitive here, it is important to have all of our underwriting completed and our contingencies as small as possible.  She explained that she has a close working relationship with a mortgage consultant at WellsFargo who underwrites for all her clients and gives them priority.  I have been researching first time home buying and read that its important to speak toh multiple lenders, however she made it sound as if he handles all her clients and in order for the process to go smoothly we needed to go through him as well.  Is this normal?  After speaking with him he said to expect a 4.2-4.5% interest rate on a conventional loan with 5% down.  What are your thoughts?

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Katrina Edwards
Commercial Real Estate Broker · Palo Alto, CA · Member since 2016 · 52 posts · 35 votes
10y

Everyone who has posted has given you good advice. The "personal gain" for your Realtor in introducing you to a preferred lending partner is likely to be limited to transaction comfort and accessibility as well as referrals to other buyers/sellers. Anything more than that is not legal or ethical. With 5% down, it sounds like you'll probably be limited to FHA financing or a portfolio loan (one the lender keeps and doesn't sell to Fannie or Freddie). Rates and fees will likely be similar for FHA. Porfolio loans may be different. In our market, the ability to DO the loan is huge. When I have my listing agent hat on, who has given the pre-approval for a potential buyer's loan makes a difference in my recommendations to my seller when responding to offers. We want to see direct lenders. Wells Fargo is one of those.

The most important thing when you are purchasing a home or other property is that you can trust the people you put on your team.  You're going to be sharing incredibly personal information with your lender and agent.  If you have doubts about their integrity, call them on it.  It could simply be that red flags for you is just how we do business here.  BUT, it could be something else is triggering your doubts.  Ask questions.  What type of relationship do you want with your team?  Business only? Ongoing friendship?  Those things can make a difference, especially when the going gets rough or there are transactional hurdles.  As far as your loan goes, contact your credit union, visit the bank where you keep your money, and ask friends and coworkers for their recommendations.  

If you decide you no longer want to work with any of your team members, tell them sooner rather than later.  At the end of the day, this is YOUR life, YOUR home and YOUR money.  Don't let anyone make decisions for you or push you into anything.  YOU need to be comfortable and understand what you're doing.  

Good job reaching out for a reality check and best wishes for finding your new home.

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  • Dave Krenk
    Real Estate Agent · Lincoln, NE · Member since 2015 · 8 posts · 6 votes
    10y

    Hello, I am a Realtor in Nebraska so I can't speak directly about California, however the way we handle clients of any kind is to have them 'shop' two or three lenders of their choice.  We tell them not to sign anything until we can review their findings, answer questions,  and help them pick the best deal.  Even though we may have lenders that we work with often, and we may recommend them, it is still totally the client's choice.  There can be a lot of variables between lenders so definitely shop around and find the best deal.  If your Realtor is still trying to steer you to a particular lender, you might want to consider another realtor.

    2Reply
  • Chase Gochnauer
    Investor · Des Moines, IA · Member since 2015 · 380 posts · 201 votes
    10y

    It's very common for Realtors to pass along their favorite mortgage lenders and lenders do the same for Realtors. Two main reasons for it, #1 is networking, if they send the lender some business then likely they can get some in return. #2, by using the lender they work with regularly, they can be confident that the deal will go smoothly. Nothing worse than working with a buyer and find out towards the end that the financing didn't go through. 

    I would still consider looking at multiple lenders but I'd go with the one your Realtor recommends if they are comparable in price.

    1Reply
  • Emily Shirk
    OP
    San Jose, CA · Member since 2016 · 13 posts · 1 vote
    10y

    Hi Dave,

    Thank you for explaining the usual customs.  I will shop around and compare offers with some other lenders and see how my realtor reacts.  Is there any reason (other than her personal gain) that her recommended lender could give me an advantage in closing a deal in this competitive market? 

    0Reply
  • Andrew Wong
    Investor · Milpitas, CA · Member since 2015 · 278 posts · 155 votes
    10y

    This extends beyond realtors, but always always shop around. Always have a backup, because if you do find out you don't agree with the way they do business, or that they are screwing you over, you can drop them without panic and second thought.

    1Reply
  • Dave Krenk
    Real Estate Agent · Lincoln, NE · Member since 2015 · 8 posts · 6 votes
    10y
    Originally posted by @Emily Shirk:

    Hi Dave,

    Thank you for explaining the usual customs.  I will shop around and compare offers with some other lenders and see how my realtor reacts.  Is there any reason (other than her personal gain) that her recommended lender could give me an advantage in closing a deal in this competitive market? 

    It is possible the financing your realtor recommends may be the best deal but the only way to know is to do some comparative shopping.  Realtors are no different than anyone else in regard to having business relationships with lenders, home inspectors, etc.  I don't want to give the impression your Realtor is doing anything wrong, I'm just saying do enough homework that you are educated in the process before you sign papers.

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    Feel free to shop others, in Addition to the recommended broker.  But one reason we recommend a certain Mtg broker is because we know they what they're doing, we can get a straight answer from them, and can get them on the phone when we need them.

    2Reply
  • Katrina Edwards
    Commercial Real Estate Broker · Palo Alto, CA · Member since 2016 · 52 posts · 35 votes
    10y

    Everyone who has posted has given you good advice. The "personal gain" for your Realtor in introducing you to a preferred lending partner is likely to be limited to transaction comfort and accessibility as well as referrals to other buyers/sellers. Anything more than that is not legal or ethical. With 5% down, it sounds like you'll probably be limited to FHA financing or a portfolio loan (one the lender keeps and doesn't sell to Fannie or Freddie). Rates and fees will likely be similar for FHA. Porfolio loans may be different. In our market, the ability to DO the loan is huge. When I have my listing agent hat on, who has given the pre-approval for a potential buyer's loan makes a difference in my recommendations to my seller when responding to offers. We want to see direct lenders. Wells Fargo is one of those.

    The most important thing when you are purchasing a home or other property is that you can trust the people you put on your team.  You're going to be sharing incredibly personal information with your lender and agent.  If you have doubts about their integrity, call them on it.  It could simply be that red flags for you is just how we do business here.  BUT, it could be something else is triggering your doubts.  Ask questions.  What type of relationship do you want with your team?  Business only? Ongoing friendship?  Those things can make a difference, especially when the going gets rough or there are transactional hurdles.  As far as your loan goes, contact your credit union, visit the bank where you keep your money, and ask friends and coworkers for their recommendations.  

    If you decide you no longer want to work with any of your team members, tell them sooner rather than later.  At the end of the day, this is YOUR life, YOUR home and YOUR money.  Don't let anyone make decisions for you or push you into anything.  YOU need to be comfortable and understand what you're doing.  

    Good job reaching out for a reality check and best wishes for finding your new home.

    3Reply
  • MJ Barnett
    Real Estate Agent · Burbank, CA · Member since 2015 · 72 posts · 22 votes
    10y

    My lender is tried & true. I ask all my clients to use him. He's fast & best deals & waive all lender fees for my clients because of our relationship. If my clients don't use him then I still introduce them & let them know he's a back--up. He's saved a handful of deals for me at the last second because the original lender couldn't do it. My business is important to me so I am nervous about lenders especially the ones found only online. If my client opens escrow I want to make sure they close. 

    Just my input.

    3Reply
  • Chad HalePro Member
    Property Manager / Investor · San Jose, CA · Member since 2013 · 779 posts · 301 votes
    10y

    Great advice already given.

    I always shop mortgages.  Though I have my favorite go to mortgage brokers.

    From a realtor point of view, you want to be confident that the lending part of the transaction will go through.  So you have your favorites to recommend that you know will deliver.   But never demand that someone use them.

    Don't be afraid to shop around.  Same goes for an real estate agent to use.  Sometimes, it is simply a better personality match.

    Best of success!

    chad

    0Reply
  • Account Closed
    Real Estate Investor · State College , PA · Member since 2009 · 594 posts · 173 votes
    10y

    @Emily Shirk

    IMO, any realtor that tells me I need to keep my contingencies as small as possible to get a deal is not looking out for me and will probably get sued someday.

    0Reply
  • Chase Gochnauer
    Investor · Des Moines, IA · Member since 2015 · 380 posts · 201 votes
    10y
    Originally posted by @Account Closed:

    @Emily Shirk

    IMO, any realtor that tells me I need to keep my contingencies as small as possible to get a deal is not looking out for me and will probably get sued someday.

     Why is this true? I would say it's true that keeping contingencies as small as possible will set your offer apart from the rest as a buyer. If a seller has an option between a financed buyer with a 10 day inspection period, or a cash buyer no inspection period, is the person with the contingency going to win, or the one with no contingencies? As a seller I've always favored the person that hasn't stacked the purchase agreement full of outs.

    1Reply
  • Account Closed
    Real Estate Investor · State College , PA · Member since 2009 · 594 posts · 173 votes
    10y

    @Chase Gochnauer

    I was thinking along the lines of inspections which is a negotiable contingency.  A open statement like that from a realtor would leave me wondering who they are working for, since contingencies are there to protect me.

    0Reply
  • Account Closed
    Real Estate Investor · State College , PA · Member since 2009 · 594 posts · 173 votes
    10y

    IMO, If a realtor suggested a buyer not get an inspection in order to get a offer accepted and something came up, that realtor could be in hot water and for good reason.  Buyers are not experts and in the eyes of the court need protection.  The realtor obviously has a fiduciary duty to provide them with that.

    0Reply
  • Dawn BrenengenBusiness Member
    Moderator
    Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Account Closed The agent telling her to keep her contingencies as small as possible isn't the same as telling her to have no contingencies. If I know my client is in a competitive offer situation, I'll have by buyer go ahead and get the inspector scheduled and a pre approval letter or POF in hand so we can make out due diligence period very short. Some buyers will even pre-inspect before making an offer so they don't have that contingency at all. If we are not worried about appraisal, maybe one would remove the appraisal contingency to make their offer more attractive. The agent IS looking out for the buyer. The buyer will never "win" a home in a competitive market with a long inspection period and financing contingencies out the wazoo. Yes, they protect the buyer, but no seller wants to enter into a contract where the buyer can back out for a multitude of reasons when they don't have to.

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  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    10y

    As a realtor I make recommendations on lenders, attorneys, mortgage brokers, inspectors, etc if my client asks and I only recommend people I have used myself so I can trust the quality of service they will get. On the other hand if they don't ask and/or want to use someone they found themselves I am completely fine with that. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Emily Shirk  in this environment a good lender is frankly just as important as the agent lots of moving parts these days with the new TRID rules a poor mtg broker can kill a deal for you quicker than you can say what the heck happened.

    most agents go with lenders they know like and trust because the deal gets done. The only monetary gain to the agent is they know the deal will get done with a proficient lender.

    As a seller ( which I am ) I am very coginizant of who the lender is and may turn down an offer if the lender is out of state.. or not known to me.. because I know it will be a problem closing.  Last week I had a new construction and the buyer went through quicken.. these guys were horrid took an extra 8 days to close because of their rules.. if they used a local lender they would have been in the home a week earlier.. and they were camped in a hotel.. and whinning like crazy that we the builder were at fault when it was their lender LOL.

    @Account Closed  I think you taking the contingencies comment a little out of context. The Bay Area market ( south bay particular) is uber competitive.. just having a 5% down is a huge disadvantage to someone.. competing against all cash buyers.. When you put a house on the market and get 20 offers on it on offer day.. you want you offer to stand out.

    and yes many will have no contingencies in them if they hope to get the home.. Its crazy I know but it is what it is.. that market is not like anything you would experience in the northeast save maybe the best parts of Manhattans or Boston  WA DC etc.

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  • Account Closed
    Real Estate Investor · State College , PA · Member since 2009 · 594 posts · 173 votes
    10y

    thanks for pointing that out.   

    0Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    10y
    Originally posted by @Emily Shirk:

    Hello!

    My husband and I are first time buyers and new to the area (San Jose).  We met with a realtor who I found on zillow with high ratings and she instructed us that because the housing market is so competitive here, it is important to have all of our underwriting completed and our contingencies as small as possible.  She explained that she has a close working relationship with a mortgage consultant at WellsFargo who underwrites for all her clients and gives them priority.  I have been researching first time home buying and read that its important to speak toh multiple lenders, however she made it sound as if he handles all her clients and in order for the process to go smoothly we needed to go through him as well.  Is this normal?  After speaking with him he said to expect a 4.2-4.5% interest rate on a conventional loan with 5% down.  What are your thoughts?

     As a realtor, I have a preferred lender that I strongly recommend my clients work with.  I do this because I know he can close deals.  Since I only work with investors buying multi units there are a lot of moving parts that go into the transaction, and he knows all the workarounds to get things done.  Last year I had 3 clients work with other lenders that couldn't get the deal done and we had to make a switch mid deal to this guy and he closed every single one.

    On top of that, when I work with him, I don't have to worry about things falling through the cracks.  When I work with other lenders, a lot of times I have to check in and remind them about the timeline and when they need to do things, with this guy he is always on top of it and we haven't had to push a closing because of financing yet.

    So as a buyer I would shop around for rates to make sure you aren't getting screwed, but if their preferred lender is competitive, I would trust your agent's recommendation.  

    PS - It is illegal for us to get any kickback from venders we recommend unless it is disclosed upfront to all parties.  

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  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    10y

    Trust but verify.

    1Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

     Inspections is a negotiable contingency. Negotiations do not stop because you are in contract, however. 

    If you write with an 8 day inspection contingency, and your inspector identifies issues requiring the services of say a foundation expert, and that can't be found until day 10... extend it, tell the seller side why.

    It may be different in the Bay Area. Here, all the negotiating power is on the seller's side... until you're in contract, at which point the balance shifts a bit to the buyer. 

    This isn't any sort of bait and switch, PROVIDED that you as a buyer had no way to know that there might be foundation issues. If they disclosed it upfront and you say you need to extend at the last minute, then you're being shifty (and/or lazy for not reading the disclosures). If they did not disclose it, and you discover it, then it's absolutely normal to say "Hey, I wrote 8 days in good faith based on what YOU disclosed. You didn't disclose this, and I discovered it. I'm going to need to extend until I am satisfied about this thing that you either didn't know about, or pretended not to know about."

    BTW as a lender, I don't want to know about any of this foundation stuff (or whatever) in writing (this includes in any contract addenda). Tell me on the phone if you want, but don't email it to me, and don't have "foundation is a mess" in addendum #2 if there's going to be an addendum #3 that changes the price (if there's a #3, underwriting will want to see #1 and #2, along with any referenced inspection reports, and now we've opened a rat's nest). 

    In writing, all I want to know is how the timeline is changing, not why. :P

    0Reply
  • Mike Garrison
    Investor · everett, WA · Member since 2015 · 15 posts · 4 votes
    10y

    I think because you are new = nervous you might want to use people that are well known=

    Check references

    Also try to not overthink every word in the transaction

    Trust that as you put your team together it will get smoother

    Keep your goals clear and simple as well and you will be less stressed 

    Just some thoughts

    Mike

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    10y

    Sure, a preferred lender has it's advantages, but to be so 'highly recommended' to the point of feeling like you have no choice? What about when it's time to get an inspection?Get your own home inspector for sure. A lot of agent referral home inspectors are 'yes men' that just don't want the deal to fail. Get one that actually inspects the house.  If every provider this agent uses is so highly recommended you feel you can't shop around, I would get a new agent.  There's one just about on every corner! 

    1Reply
  • Mike HurneyPro Member
    Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
    10y

    @Emily Shirk The Broker and LO are probably giving referrals to each other (at your expense).

    @Ryan Dossey Trust but Verify yes R. Regan!

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    @Jay Hinrichs is absolutely correct that having a good lender, with a good reputation is vital in a competitive housing market. I know what lenders in my market can close a deal. I know what lenders will write a pre-approval letter for a corpse.  Ive turned downmany offers from potential buyers based on what lender they were using. When I am working with a buyer, I prefer that they use a lender who sends the buyers information through an underwriting process to have a pre-approval that holds real weight. Some buyers insist on using a substandard lender because of some promise of a lower rate or lower fees....but that just does not fly in competitive markets

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Mike Hurney  I have 40 years at this... and your dead wrong.. the best we do for each other is pick up lunch.. or a bottle of wine  etc.  no kick backs at least with professionals.

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