Seller's Agent Asking for DU. Should I provide it?

Question

Good morning, BiggerPockets Family.

I recently submitted a Residental Purchase Agreement (RPA) with a pre-qual letter from my credit union and FICO scores. The selling agent asked for a Desktop Underwrite (DU), but my credit union advised not to provide it. My credit union's reasoning was they don't like to provide a DU to the seller and his/her agent because of all the sensitive information on a DU. The representative from my credit union asked, "Who's approving the loan, us or the seller?" I responded accordingly, "You".  The representative said, "Why do they need a DU then?" What do you think about providing a DU with an RPA?

Russell Brazil · Answer

If I were the seller or listing agent, you wouldnt be buying the property, not just because of not providing the DU, but if the lenders response was that, it would immediately make me think that lender is completely incompetent and there was no way that deal would get to closing.  A good lender will jump through hoops to assure a seller/listing agent that the deals going to close, not create barriers to that information.

Don Alder-LaRue · Answer

I see this a lot in the current market, and saw it a fair amount in the down market.

A pre-qualification letter is not strong enough to get a deal these days.  You need a pre-approval letter from your lending institution.  It does not need to give all the sensitive information, but it does need to state clearly that the underwriter has reviewed your financial information (income, credit ratio, FICO scores and the such) and has fully approved you for a loan, subject to an acceptable purchase contract and appraisal, as well as have their contact information on the letter.  The pre-qualification letter only says they've quickly looked at your application and think they can do the loan - not good enough in a competitive market.

Some listing agents are requiring the buyer be pre-approved by the agent's lender of choice.  The buyer does not need to use that particular lender, they are simply trying to protect their clients interests the best they can.

Go back to your lender and get the pre-approval letter, else your offer will likely not be accepted.

Wayne Brooks · Answer

Not an uncommon request from a competent selling agent/seller. You mentioned having a “prequal” letter. A “prequalification Letter” is garbage. ......no tax returns, W-2, pay stubs, bank account info required. If you have a “Preapproval” it can be much more valid, the lender may or may not have gone thru the DU process

The reason to ask for a DU is to verify that the lender Actually looked at everything they should have in order to Preapprove you and that they actually Did the DU step

It is in Your best interest to provide the DU if you want the seller to be confident in your offer. You can easily redact anything sensitive. No downside to doing it.

Your lender should be well aware of this....it sounds like they likely didn’t do the DU step

Michael McNally · Answer

It is absolutely illegal for a lender to send DU findings to an agent. Your not licensed to be handling that kind of information legally. For instance as a lender we are not allowed to send a credit report to a borrower because we are not a credit reporting agency. Why then would we be allowed to send it to the listing agent? That's an overstep of your licensure which agents do ALL THE TIME. A pre-approval letter states that it's been approved by an individual that is approved to do so. A "good lender" doesn't have to do illegal activity to assure a deal will close and an agent has no right to the kind of information that would make identity theft possible. Sorry, but you all are wrong for asking for the findings.

Jesus Pazmino · Answer

It's true, Banks and Credit Unions will not provide DU's as they are audited much more than brokers and lenders.  It is against Fannie Mae and Freddie and RESPA guidelines to provide such information unless specific information is left out and additional verbiage is added to the DU approval to specify that 1.> Fannie Mae/Freddie MAC is not a lender and the final underwriter of the loan 2.>That the DU is not by any means a commitment or guaranty 3.> removal of the liabilities, Income, date of births, socials, FICO, etc.

The DU provides information on Credit, liabilities and income and it can be possible that one offer will be chosen over another because of a FICO store or income even though it gives an approval and that is a very thin line for discrimination.  We all have to abide by the FAIR Housing and EQUAL and FAIR CREDIT ACTS.  If there is a strong offer with high down payment and good purchase price and fast closing or fast inspection periods and no closing costs requested, reach out to the Loan officer and ask any other questions which will not break any laws.

ALSO - ANYHING CAN BE ENTERED INTO THE SYSTEM TO MAKE THE DU LOOK SUPER SWEET SO IT REALLY DOESN'T MEAN ANYTHING IF THE LOAN OFFICER IS BEING DECEPTIVE.  OH AND BY THE WAY, THE DU DOESN'T NECESSARILY VERIFY W2 AND TAX INFORMATION. IT'S ALL BASED ON WHAT THE LOAN OFFICER ENTERED MANUALLY EXCEPT FOR THE CREDIT SCORE.

Joe S. · Answer

Your response was a little late. With that being said, it’s always good to see someone that feels strongly about what they’re talking about and not afraid to set matter straight. :-)

David Mussaw · Answer

Thank you @Wayne Brooks, @Russell Brazil, and @Don Alder-LaRue for the advice. I didn't follow through with the DU step. Luckily it was a lesson learned at my expense and not a client's.

Javier Martinez · Answer

The responses from some Real Estate “professionals” in this thread explains why real estate agents and representatives wear the badge of honor of being nosey, careless, borderline illegal and non-compliant with the most basic regulations and elemental  ethics. Someone up here  saying he “wouldn’t” sell the property to someone refusing to disclose DU letters tells me exactly what I need to know.  If this person holds a sales license, I’d report it to the proper authorities. If he is just a seller, I’d just tell him to stick their property up their net assets.

I wonder if he would just disclose his numbers and accounts if I say… you hold the bricks but I hold the access to the $$

Jeffrey Isenberg · Answer

My practice is to send a .pdf copy of only the first one or two pages of the DU showing approval only and strength of qualifications such as Fico Score etc...   In the interests of privacy as stated above, the selling agent has no need to see any specifics beyond that.

Seller's Agent Asking for DU. Should I provide it?

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