Info on Pre-Qualifying for a Mortgage

Okay, so, I’m thinking of buying a house, and I found one that I really like, I am considering making an offer on it. It’s a foreclosed home.

I called the listing agent to make an appointment to see it, and I was told I had to pre-qualify for a mortgage before they’d let me see it. I thought this was odd, but okay, I went ahead and did an online pre-qualilfication. I called a real estate agent I knew (not the listing agent) and she arranged for us to look at the house.

Now, we want to go back on Friday to see it again, and then we’d decide if we wanted to make an offer. The listing agent is saying that they wont’ accept an offer unless we pre-qualify with a PARTICULAR bank that happens to be the bank that owns the property, and through that bank’s agent who also happens to be the listing agent’s husband. We don’t have to get the mortgage through them, though.

Is this normal? I already have a pre-qualification letter from another lender. Is there a reason I would have to use the agent’s husband? Would the bank really refuse my offer if I don’t use them to pre-qualify, or is it just this listing agent’s quirk? Does her husband benefit in some way if we use him to pre-qualify, or is it just to make the listing agent feel better? Is this common practice? I will do it if it’s required, but frankly it annoys me that the listing agent seems to be anal about this. Have any of you heard of anything like this? I appreciate any help.

In my experience, that is very much NOT normal. And in this market, it’s downright stupid. I suspect if you balk at their ridiculous terms, they will let you do it your way. Just MHO.

Edit: but don’t go by some random stranger on the Internet. If you have a good agent working with you, trust to her advice.

It sounds to me like listing agent’s husband gets some kind of commission on every pre-qualification he gets. No, this is not normal (well, it’s not normal here, and from all I’ve heard of real estate in the US, it’s not normal there either). I wouldn’t play that game, and I agree with Tim R. - run this by your agent, and I don’t think the listing agent will continue to insist. If she does, I’d look for another house - that’s a red flag to me.

I can’t think of a good reason to do it, I sent an email to my showing agent, asking her if she knew why we had to do it that way. I’m thinking that the agent is legally required to bring all offers to the owner, they can’t hold back our offer simply because we didn’t follow their quirky rule. But I didn’t know if it was legally acceptable to keep our offer from the seller (I am in NJ)

I don’t think it is legal to keep any offers from the sellers; that seems pretty universal to me.

My agent is telling me it’s required because it’s bank-owned. Supposedly they want to know I am truly qualified before they put all their people to work on processing. I can still use the company of my choice to get the mortgage. Does this sound reasonable?

So, they just assume that the bank you already went to is lying to them? I’m out of ideas - the banks and real estate system is so wonky in the US, that sure, maybe that is what’s going on.

REO’s routinely require proof of funds on a cash offer and a pre-approval to be submitted with your offer if you are planning on getting a mortgage, but viewing the property should require neither.

I am not a real estate professional and this is not professional advice

When you pre-qualify for a mortgage, the lender has approved your finances for a loan. In order to get a final mortgage commitment, the lender also has to agree to accept that particular property as collateral for the value of the loan.

It sounds to me like there may be a reason that the sellers suspect that this property may not be approved by most banks. The most likely reason for the bank not approving the property is that it’s value does not appraise to an amount equal to the purchase price. There may be other factors as well, in multi-unit dwellings ( which I am more familar with ) there may not be a sufficient number of owner occupied units ot the building or complex may not have sufficient reserve funds held back for repairs and maintenence. I am not sure what similar factors might affect a single family home though.

Here’s what would make me nervous.
Generally all the inspections and approvals are conducted after you execute a contract to purchase the property. This contract will have a LOT of contingencies ---------if the inspection shows problems or the property doesn’t appraise for the loan value the contract is voidable.

So let’s say you get this second preapproval from THEIR bank and then go into contract. At this time you will need to put a down payment in escrow.

Then let’s say further that your banker has the property appraised and says “Hell No” !! This property is only worth 150K, we aren’t loaning you 300K to buy it !!

This might give you cold feet and you might at this point decide to keep looking. But you have this pre-approval kicking around from their bank…who also currently owns the property and may be desparate to unload it. They might say…OUR appraiser says it is worth $350K , so there !! While your contract is void if you can’t get financing we know you can, OUR bank will finance and they have approved BOTH you and the property. At this point you might have a legal fight in order to get your deposit back.

If you hadn’t gotten this pre-approval you situation might have been a little clearer. I would be cautious and I might actually pay out of pocket for an appraisal before going under contract even though this is atypcial.

That doesn’t sound so unreasonable. Once bitten, twice shy. If I were a bank, I’d right now be saying “We’re never taking anyone else’s word again. Let us look at his finances and see if he can buy this house.” Then I’d let them see the property. Maybe it’s some business counter-intel reason for stopping other banks’ customers from seeing the property. Or maybe they’re just hoping to get your business and are using this as a sort-of forced advertising tool. I dunno.

Thanks for your input, AnnHedonia. The house sold a few years ago for $306k, is for sale in foreclosure at $165k (just lowered $10k), is in line with comparable homes in the area and is in line with its tax appraisal. I’m pretty comfortable with the price and getting approved, but it just irks me to have to jump through what I consider to be unreasonable hoops for the listing agent when the bank obviously wants to get it off their hands. I admit I don’t want to do it just to be contrary :smiley:

True enough.

I’m not sure I’d go ahead with it, either - how about you try responding by saying that you’re not going to do that, and you’ll just look for another house that doesn’t have this requirement, and see what their response is?