As many local real estate markets have remained “red hot,” with sellers receiving multiple offers and bidding wars common, some seller’s agents are requiring that the buyer be approved for/use a local mortgage lender. In some cases, agents are insisting that an out-of-state/national lender cannot possibly understand the local market and that using one increases the possibility of a deal falling through. This creates a problem for many corporate clients who recommend or require one of their approved direct-bill lenders as part of their home purchase benefits
It is important to note the following when discussing these types of requirements with your employees:
- Lenders, regardless of their location, use appraisers that are local to the area. The appraiser selected uses fact-based market information to determine a value. Regardless of whether the lender is national or local, if homes have not historically sold far above market value, they will not be able to justify that price until multiple sales are completed.
- Local lenders are not typically well-versed in relocation benefits and expectations for how those benefits are applied to a mortgage (e.g., home sale buyouts, relocation payments, direct bill, a subsidy, etc.).
- Many national lenders are banks that have a local branch presence in the market they serve, making the argument that they are not local a moot point.
- Many preferred lenders participating in relocation programs offer a fully underwritten approval, meaning that the transferee’s income, assets, and credit are fully underwritten before a property is located.
- Some agents will erroneously claim that the direct billing of closing costs to the client increases the chance of the deal falling through. In reality, it increases the chance of a deal closing because it reduces the out-of-pocket expense the transferee needs to bring to closing.
The current real estate market is unprecedented, and we would never want to do anything that puts our transferring employees at any disadvantage. Sometimes what is being presented is a personal preference because agents have direct relationships with local lenders, but there is no evidence that a national lender is not equally as capable – if not more so – than local lenders.