Once a home buyer engages the services of a real estate agent to help look for a house, or when he has an offer to buy a house accepted, the agent would usually ask the buyer to work with a loan officer or mortgage broker to obtain financing for closing.
Whether you have already obtained financing or not, it’s almost certain that the agent would highly recommend that you speak with his or her referral.
Why would your agent do that?
On the surface, most people would assume that it’s because of the referral fees that the agent would receive from the lender for sending customers to them.
There’s nothing wrong if you come to that conclusion. After all, money is a key source of motivation for the actions of those at work.
But the greater concern for an agent is actually to ensure that as little problems come up as possible so that closing can be as smooth as butter.
While property agents do in fact collect a finder’s fee, that is just a side dish compared to what they would receive as commissions in helping a buyer find a house. And the main course would be out of reach unless the deals goes through closing.
Should closing be held up due to the “small” matter of financing, then it would all their work put in going down the drain.
So the broker or loan officer that your agent has recommended is most probably suggested because the agent has worked with him before, and trust that he would be able to fund that real estate transaction in timely manner with the closing date in mind.
This is the main reason why agents can sometimes insist that a home buyer works with their loan officers, even when the buyer has explicitly stated that he has got it all sorted out.
They really just want to have their deals closed.
Thus, in all probability, a local lender will be referred as they might have worked together for a few cases already and found their relationship mutually beneficial.
On top of that, because of their close relationship, they are able to candidly discuss subject matters that they are uncomfortable about discussing with someone they don’t really know that well.
This enable the agent to have a little control over what happens and also inform a borrower of information that a banker cannot reveal to the borrower.
So while it might be a smoother ride by going with a banker or broker which was referred by your agent, there is absolutely no guarantee that you would be getting a great loan.
In fact, the odds of getting one that is far from great is higher than normal due to the dynamics of referral businesses.
For example, a home buyer from Kansas called me an said that his agent doesn’t seem too pleased that he spoke with an online lender and has already obtained approval. The agent then proceeded to talk about how online lenders cannot be relied upon and even shared some stories about people being screwed by them.
To be honest, the agent might have the best of intentions. She can depend on her local lender to make everything as smooth as possible. She could probably even call up the loan officer after office hours to inquire about the status of a loan application.
But when the property buyer compared the mortgage rates of the online lender and the recommended local lender, it wasn’t even a match.
So should you not waste any time with the referral loan officer?
When you have entered the phase of home loan shopping, you should talk to more lenders so as to find what are the best deals that you would be eligible for.
So the answer is yes. You should call the local lender referred by the agent.
This would at least be a dependable back up plan to fall back on should your own quest for the best loans turn out to be a lemon.
And you never know.
Maybe the local lender would move mountains to acquire you as a client and offer something below the competition.
But remember this.
The person who would be working everyday to pay that mortgage is you and the money comes from your own personal bank account.
So do take a better deal from another lender even if it means having a displeased agent.