Park Fishing

I hope you will bear with me while I tell a few stories.

In mid 2007, I was hosting an open house. While I was talking to one prospective couple, they said that their lender had advised them in early 2006 not to purchase a home. He had told them that real estate prices were going down and that they would be able to get much more for their money if they waited while prices declined. In talking to them some more, it became apparent that this couple had no special relationship with that lender other than he had given them some good advice and they wanted to reward him by giving him their loyalty. The lender responsible for giving this excellent advice was Tim Dalske.

When a lender or real estate agent gives advice like this in situations like this they know they will probably lose 90% of these clients to other, more aggressive lenders or real estate agents who subscribe to the ABC (Always Be Closing) school of salesmanship.

I was presented with a similar situation in March of 2006. I was working with a couple who wanted to purchase a home in North Yuba City. At the time, I told them that there wasn't anything available in their price range but that prices were declining and, with a little patience, we could find them something they would be very happy with.

Unfortunately, in early April, they met an ABC agent who sold them a home in the lower priced Southeast part of Yuba City for nearly $415,000. Now, they are living in an area where they didn't want to be and they are in a home that has probably lost $200,000 in value.

Another lender (Ken Noall) told me that in November of 2007, he was approached by a loan officer wanting to join his office. During the interview, Ken asked if he had made many FHA loans where he was currently working. The loan officer responded by saying that his present company could do FHA loans but that they tried to avoid them because there were other loan products that would generate more income. In other words, this loan officer and his current company are more worried about putting people into the loan products that generate the most profit for the lender and loan officer rather than putting their clients into the product that is best for the client. Ken's comment to me was that this was the type of agent they try to fire, not the type they want to hire. In fact, it is companies and loan officers like this that bear much of the responsibility for the Sub-Prime, Alt A and Pay Option ARM loan mess that we are currently dealing with.

Another ploy used by unscrupulous lenders is to write prequalification letters for people who really aren't qualified. In one case, we were 45 days into a 45 day escrow and the buyer was asking for an extension. The lender's explanation was that they were trying to work through some credit issues that had come up and thought she could have everything resolved and be ready to close in a couple of weeks. When I asked her how the appraisal had come out, she said it hadn't been ordered yet because she "didn't want to waste the buyer's money on an appraisal if she couldn't get them approved." It was obvious that she had known about these credit issues from the start or she would have ordered the appraisal as soon as she received the loan application. It was also obvious that she was willing to write prequalification letters for people who weren't really qualified. In addition to the extra work this creates for agents, this type of action causes sellers to waste valuable marketing time while they take their homes off of the market for people who really aren't qualified.

Most of these ABC lenders are slick enough that you won't even know when they are charging you with unnecessary fees and prepayment penalties or above market interest rates. The best thing you can do is stick with lenders who have a reputation for treating their clients fairly.

Our recommendation to you is to use one of our recommended lenders or ask one of the local title companies for the name of a good lender.

     
Sincerely,

Lloyd Leighton

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Last Updated 12/30/2011