do you ever pit lenders against each other?

Question

Just curious if anyone has any thoughts on pitting lenders against each other.  I have a lender who keeps on asking me to give them the other lender's term sheet so they can "beat it".  And I keep on telling him that he should have put his best foot forward in the very beginning.

While, I may be able to save a little bit of money by letting this lender undercut the other lender, it seems like a "jerkmove" and I don't want to extend the loan shopping process any longer.

Anyone have any thoughts?

Jerry W. · Answer

Actually I am from a small town and have used this tactic several times.  I normally ask for rates from each of the 3 banks in town.  when I get them I go to the next from lowest and say I have this rate quote can you beat it.  Sometimes they say no, sometimes yes.  I have loans with each of the 3 banks in town so they know I am not bluffing.  I go with he lowest rate, but I never say which bank I have the quote from.  In one situation the banker said I cannot beat it but I will waive the loan origination fees, and closing costs and match it.  I now have begun negotiating the loan origination fees as well.  Recently I went to buy a part owner of a joint venture out and had to get a pretty large loan.  they have been so good to work with that my last 3 loans have all been with them and no shopping around.  If their rates get too high though I will go back to shopping.

Steve Babiak · Answer

Tell him a rate a bit lower than the one you have, and see if he bites and beats the rate - or just beats it (leaving you alone) ...

Chris Haas · Answer

I wouldn't give him the sheet.  Simply asking him if he would mind you giving his competitor his sheet should push him back a bit.  
	
	I think it's wise to have more than 1 lender if possible.  Just tell lender #2, that you are happy with #1, and you need a reason to change, or even try someone new.  It's not uncommon for a mortgage broker to do a deal at par in order to gain the trust of a new client, if they are certain there are more deals in the pipeline.

Account Closed · Answer

@Jason Mak

You have the right idea.  Do your shopping before you commit then stick with the one you choose.

Jason Mak · Answer

thanks all for the replies

@david C

This is for a refinance on a building.  I asked all the lenders to put their best foot forward and now one of the lenders is getting upset because they didn't win the business.  He keeps asking me to show him the LOI from the other lender so he can beat it.  While this may save me a few bucks in the short run, I'd rather build the relationship the lender that operates without such desperation and with a bit more integrity.  At least that is my gut feeling.

Account Closed · Answer

@Jason Mak

I presume you are talking about a consumer loan, a purchase or refi for your personal residence?  Private/Hard money lenders don't generally have a rate sheet.

If you are talking about the wholesale rate sheet, that is not usually shown to the borrower, it's strictly for the mortgage broker's consumption.  If you have access to the broker's wholesale rate sheet you can grind down the pricing, not a position brokers generally like to be in.

I think you are right that it will extend the lending process, and you will probably get no more than an 1/8% decrease in interets, not worth the stopping and restarting of the process, imo.

Bill Gulley · Answer

I suppose you're talking about the Good Faith Estimate.

You can negotiate with any lender, how far you get depends. If a borrower was a slam dunk, not much processing, I knew that area of the property, I didn't mind being fair. That's usually not the case with investors, they have rentals, you need to dig through tax returns, ARV to verify, purchase contracts on properties not held very long, the list goes on......most are lucky to get a loan and such loans aren't usually gravy deals, more like a PITA.

Consider establishing a good lending relationship with someone who works with you and for you, beating them up on a hundred bucks might not be a good idea.

My attitude with most were....hey, that's a good deal, see if they can close that for you! Guess what, many came back on other deals and didn't go there. :)

Chris Martin · Answer

Are these private lenders you are talking about?

do you ever pit lenders against each other?

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