How do You Balance Controlling a Deal with Steering?

7 Replies

So, one of the areas I attempted to implement recently seems to not be an option. By this, I mean that I attempted to note in the A2A remarks that any FHA buyers were required to gain pre-approval through my lender to have access to viability of the buyer being able to close the deal (credit, income, etc.).

My agents broker called me out and said no. He indicated this is steering and could not go in the MLS...is this a state-specific concern? Thoughts?

p.s. this is a $180k upgrade home and I do not want it tied up by an ambitious first-time buyer...

Medium grey red iconBrandon Sturgill, Hypothetical Insight, LLC. | [email protected] | 614‑379‑2017 | http://www.InvestHypothetical.com

I've had brokers tell me this before (not my brokers), and while I'm not an attorney, I firmly believe there is nothing illegal about this practice and I'm perfectly happy to stand in front of a judge and argue it if it ever came to it.

Here are my thoughts:

-  It's not a RESPA violation.  RESPA simply states that agents can't be compensated for bringing a client to a lender.  I assume you're not being compensated and are simply doing it to ensure your buyers are qualified.

-  It's certainly steering if a listing agent is forcing a buyer to use a specific lender.  No arguments there.  But, it's not steering if the seller of the property requires a particular lender -- the seller is allow to require anything they want (so long as it doesn't violate Fair Housing laws).  If the seller and the listing agent are the same person (agent as principal), common sense would dictate that when it comes to evaluating an offer, the seller/agent has all the rights a non-agent seller would.  The seller/agent shouldn't be limited in evaluating an offer just because they are licensed.

- It's very common to see pre-qual requirements in REO listings (Bank of America started the trend about 5 years ago). While that doesn't mean it's legal, that tells me that it's not clearly illegal -- there are no laws that I know of that provide a specific right for pre-quals to REO sellers. If BoA and other large banks are willing to take the risk, I am as well.

-  I don't put this requirement in the listing (though obviously that doesn't make it legal if it's not already legal).  When I explain the pre-qual requirement to my buyers, I always make it clear that they're not required to use my lender and that I'm not being compensated by my lender.  Of course, this also doesn't make it legal if it's not already legal, but it should provide some reassurance that I'm not trying to force a buyer to use my lender.

Again, I don't know if there is any case law to support the legality of this one way or the other (I've heard lots of debate), but I'm personally comfortable with the risk...

Hi @Brandon Sturgill steering is when you guide a client away from or to a particular community based on the racial make up of it. I'm not sure why asking to see a pre-approval letter before showing it is a problem. If I was you I would contact a high end luxury agent around the area and see what parameters they use to avoid wasting time and showings.

Originally posted by @Cierra Seay:

Hi Brandon Sturgill steering is when you guide a client away from or to a particular community based on the racial make up of it. I'm not sure why asking to see a pre-approval letter before showing it is a problem. If I was you I would contact a high end luxury agent around the area and see what parameters they use to avoid wasting time and showings.

 There are lots of different types of steering in real estate.  And mortgage steering is one of them.  RESPA specifically calls out mortgage steering as an agent getting compensated by a lender for requiring a buyer to use that lender.

Agree with @J Scott .  The requirement I use is they must be Preapproved by my specific lender, they are free to then use any lender they like for their loan.  I can't see why a Broker would be scared of this.

@J Scott  Glad you commented on this...I picked up on this technique from you originally and found nothing suspect about it when I listed my last property. I was a bit perplexed by the brokers comments, but defaulted to their opinion...perhaps I need to sit and have a conversations with the broker about the rationale...

Medium grey red iconBrandon Sturgill, Hypothetical Insight, LLC. | [email protected] | 614‑379‑2017 | http://www.InvestHypothetical.com