Hawaii Real Estate | Hawaii Relocations | Hawaii Home Buying & Selling

great points here. I agree there is issues for asking for a second preapproval, that is simply nuts and more pain and stress to your buyer.

Sally,

I understand why sellers would want to have 2 approvals, the mortgage market is so volatile that the seller just want to be sure that the lender the buyer is using did their due diligence.

One of my agents worked with a buyer for about 6 months until the buyer found the right home for them, at that time, the buyer contacted his lender again, (one of the large national banks) who then informed the buyer that he never qualified for the amount that they wrote on the pre-approval letter... (about $250k) and he only qualified for about $150k.

Everyone was angry and very confused as nothing on the financial situation of the buyer had changed.. we later found out that though the lender only ran a credit check... which we all know... it is not enough anymore.

It is not easy to demand a second pre-approval, a lot of buyers might be turned off by this, but the right buyer... the one who falls in love with the home... might not mind the extra step.

I liked your post and its pros and cons. :D

Stan: It could go both ways on this...the problem I have is with agents demanding and not having the proper documentation from the seller authorizing this stipulation.

Patty:  key is .....sellers....not their agents. :)

 

If listing agents prepare a buyer for the likelihood that they will have to cooperate with the owner's lender verifying their qualification to buy, there shouldn't be a problem.

Considering the worthlessness of most pre-approvals, we shouldn't be surprised that the industry has been reduced to having to approve pre-approvals.

We have had short sale seller's lender proof our buyers and if they make an offer the buyer can't refuse, so be it.  Our fiduciary is to the home buyer, not their lender. 

In most cases, we have managed to avoid the short sale sellers lender requiring that they "run the buyer through" by accompanying every offer with a Buyer's Financial Statement.

 

Lenn: There shouldn't be a problem ...agreed. The worthlessness of SOME have disqualified the rest who are giving the preapprovals... it SURELY has reduced it to have to approve preapprovals hasn't it???  Alas, most of my buyers have complied but it sure has caused friction.

Not only that it can kill a sale. Consider buyer makes offer on house no 1 and will borrow 50% on a loan. Sellers want their loan offer to approve him. He says no. They are buying another house. What seller no 1 did not know was that my buyers could have bought the house cash, but for tax purposes wanted some of it financed. They got so ticked off they went to find another house. They were down right offended. House no 1, still for sale.

Hi Sally - I have asked a few of my buyer clients to get a second preapproval because of the shaky reputation of the lender they went to first.  I would prefer that they go to a bank or other direct lender which may produce a more accurate preapproval, but some letters I see are worthless, prepared by a broker with little or no expertise.  And it is no surprise that when they get the second letter, it is for significantly less than the first.

Also, most banks selling their inventory of REOs will require a preapproval letter from their own bank, so they can be sure that the sale is likely to close, but they always say that you are not required to get your loan through them - just a preapproval.  It is a pain, but they hold the cards.

If given the opportunity, I always ask my buyers to go to any one of three lenders I recommend to get their preapproval, then they can go where they want for their loan.  That way I know that they are more likely to have a deal that they can close.

I see no problem with it since there are still a lot of sloppy lenders out there and preapprovals are not worth the letter they are printed on unless you know the loan officer. 

I have a problem with it.  I'm often telling my buyers they are required to do it, but I don't like the practice.

I think the option should be that the listing agent contact the buyer's lender first, and if they are not satisfied, then by all means get a second approval.

Sally - as Susan already said that more and more REOs require another pre-approval while still going with their choice of lender. Surely it will cause friction since the buyer is saying it will drive down their credit score.  Have not seen this happening on Short Sales yet.

There are many REOs on the market where they insist on pre-approving the buyer with their bank before they will look at an offer -- hate it when this is the case.

a simple inquiry as to what the lender based the preapproval on may help. if there is no hard core data, than another is justified.

maybe a 3rd or 4th would be helpful. you can never be too sure you know.

Sally. Our buyers usually just pass on looking at those listings. There are plenty more listings out there and we just don't have the time to waste withthis foolishness. NEXT!

Man, I come in here easy to write a comment and I find that my dad has stolen my thunder. LOL. NEXT is right...my buyers almost never even think about getting another pre-approval done. And I don't blame them, this is ridiculous. Luckily for our buyers, there are thousands of listings to choose from.

Pre-approvals aren't worth the paper they are written on anyway.  There are so many conditions that are put on there that the banks could find a way not to fund the loan anyway.  You could have 5 pre-approvals and it doesn't mean anything, whether it was the Seller's choice or not.

Thanks Brian and Nathan for saying Next. That was my first thought but I started second-guessing myself after reading the responses. I mean, I wouldn't be the one to make the decision, I would include the listing in what's sent to the buyers if it's appropriate to what they are looking for. But all things being equal a property with conditions on it may be the one who loses out to a property with no conditions on it.

We are seeing that in Michigan with many bank owned homes.  Seems like the lenders don't trust other lenders... go figure.  Thanks for sharing.

Sally, the only time we have asked for a local lender to be used, and we don't say one particular lender is on short sale listings. We have had offers on short sales from internet lenders with prequalification letters to find out that the buyer had a 540 credit score. Thnakfully most of the buyers around here have wised up. On short sales we cannot afford to have the home off the market because of a lender who would give Charlie manson an approval letter.

Sally.  Many procedures cause friction with buyers. 

The only solution to this problem is to prepare your buyer for the fact that this is routine procedure and present it in a manner that indicates that, because they are qualified, we are glad to cooperate.  Agents who negatively handle this matter are not helping. 

Further, since the lender for the buyer must approve the sale, they often make offers to our buyers that the buyers can't refuse, or that we can take back to their original lender and ask them to match it. 

We present this matter as an "opportunity time" for our buyers. 

Unlike the Tutases above, we don't have that many short sales or foreclosures that are similar in price/location/condition that the buyer can just move to another listing. 

Personally I would tell a seller to pound sand if they did not like the pre-approval but I am not the buyer - just the buyer's agent. But if they ask....

Sally:

All the times I've seen this here, it has been bank-owned properties and is a stipulation of the seller. I hope this is not going to become a new thing. Certainly our board would not like it!

It all boils down to how believalbe is the lender. The thought hit me that there are cerdit scores for the client... maybe there should be a similar rating system for lenders. A lender with a high score would be a good choice for the buyer, and the seller, seing the high lender score, would have reason to accept the buyer's choice of lender, and therefore have confidence in his Pre-Approval Letter". As the song goes..." what a wonderful world that would be..."

Hay, maybe there is more value in this idea than humor....?

Sally... I can see why a seller would want this.. it makes sense.  But it can also push the buyer away, thinking that they are being forced into something.  But here is another thing to think about.  Are we talking about a real pre-approval or just a pre-qual that some lender calls a pre-approval.  I didn't want to link to a post I did a few weeks ago, but there is a big difference and if you read some of the responses by loan officers... the pre-approval is not the same for some.  So what happens if the loan officer just didn't ask the right questions and or calculated income wrong... but ran it through the automated system and got an approval.. and that is as far as it went.  Just food for thought.. thanks

Okay folks....here's a doozie for ya...

There are bank owned properties that my buyer's have gotten the second approval and remained with their loan officer from get go....we felt bad though as we 'used' the loan officer for the bank they wanted us to get preapproved for the second time with. 

On a second note.... we have properties that are not short sales, not bank owned and ready to go...and get this:   Not only did the agent want a preapproval from a funding lender (how does a mortgage broker pull that one off without a full file?) BUT also...NO  FHA or VA loans because they don't want to be bothered with government loans.

Frustrating to say the least.  Get a property that's not bank owned or short sale and have to deal with all this?

 

 

If this second lender pre-approval is required for acceptance of an offer, I think our MLS would require that this be indicated in the remarks. A seller or agent shouldn't open themselves up to a fair housing violation or other accusation by not stating this upfront.

Some REOs require a pre-approval from a particular lender, it's the bank's house, they can pick their own terms for acceptance of an offer. Whether I dislike the practice is irrelevant.

I'm going with what Lenn said....the way the agent handles it can make all the difference.

This is where being an MLO in addition to a real estate broker comes in handy.  I simply call the buyer's MLO and ask the right quesitons.  If they try to BS me, I know and call them on it.

Tom

Leslie: Yup...we can all educate our sellers and buyers but when it comes down to it...I will not coerce my client into doing so when they feel uncomfortable.

Sally... that is just ludicrous about the seller not wanting FHA or VA buyers... I wonder if this is the listing agent giving this advice.

Here in sunny San Diego having an offer by a buyer get per-approved by the sellers agent lender is standard practice. Many times buyers are unhappy about this additional hoop jumping, but with inventory so lean -- its part of the game.

The only thing that I am not pleased about is the lenders that the buyers need to be pre-approved by what to poach that buyer from the lender that buyer was originally pre-approved by.

Jeff....hmmm I wonder :)

Lorraine/Loretta:  POACH is the word I was looking for lol

We see this a lot with short sales and REO's, and most clients prefer to use their own lender.

Sally I have been seeing this more and more.  If I was the Buyer I would comply with the request if I really wanted the house, but I would also this question.  "If the Seller or Listing Agent is trying to persuade a Buyers to a particular Lender or Loan Officer, where will that Lender or Loan Officer's loyalty be?"

Sally - First and foremost, my pre-approvals are NOT worthless; I do an extremely thorough and complete pre-approval for every borrower.

Secondly, I warn my borrowers from the get go that they will be asked to do this umpteen times during their home search and while the LA's will tell them and their BA's that it is merely to assure that they are truly qualified, rest assured, it is simply to abscond with other lenders pre-approved and qualified buyers and retain the loan.  After that, I let them decide whether or not they want to play that ridiculous game.

Lastly, after making several offers and having to get pre-approved several times and NOT getting their offers accepted, my borrowers come to discover that all those other credit pulls over the past couple of months actually had a negative effect on their credit score.  While I have been able to prevent some of the additional credit pulls by speaking with the LA's and/or the banks lender and letting them know what I have done, there are other times that once they found out that the buyers had another lender, they refused to talk to me.  Of course, my borrowers offer never got accepted after they went through the hassle of getting pre-approved again.

After being burned once or twice by these other lenders, almost all of my borrowers instructed their Realtors to disregard any properties that required them to get pre-approved with some other lender that they had no intention of using.  In otherwords - NEXT!!!

Donna: With low inventory here for certain price ranges  a few of my client's had mo choice but to look at foreclosures....and they did get accepted after going through the extra hoops...they did however, stick with their original loan officer because they felt comfortable with them. Sorry ....they ask us to go off elsewhere then the lender can blame them for causing the extra work and us USING them just for that purpose.

George: I've always let my buyers know that this is a formality and if they like their loan officer to remain loyal as they will be looking out for their best interests.

 

It's an attempt by the LA's to get mortgage loans through their buddies. Perhaps their mortgage buddy is funding marketing material for the LA.

My favorite mortgage guy does fast loans and works hard at it. I do not get a kickback. I do not get free marketing material, and would not accept any of it. And on my listing I would not insist that the buyer get qualified with him.

In AZ I'm seeing a lof this recently.

In addition, in AZ the buyer is the one who chooses the Title company. With short sales and REO's I'm ok with using the banks title company because they have done work, and there is usually less cost to the buyer.

Now I'm seeing regular sales with the language "MUST use xyz Title Company. This is just showing favoritism toward a title company who provides free marketing material to the LA.

On any of these regular sales, I'll submit an offer with my buyers LSR, and the buyers choice of title company. The LA must present our offer to the seller. If they refuse, then I'll inform my buyer and see if he wants to move on, or deal with this kind of BS.  I don't want my buyers credit dinged on every offer they may make. However, it's up to the buyer. I can only offer my advice.

 

The last sale that I had with a REO property where the seller required their own lender pre-approval ended with that very same lender dragging their feet and screwing it up 8 different ways...  My buyers ended up walking away rather than paying the penalty that the same bank wanted for the late closing... 

They got another property and used their own financing. 

BTW, this was a couple putting 60% down, VERY high scores and under-buying their qualification by a high multpile.

This is becoming fairly common around here, but generally I find that having the buyer's lender talk with and provide documentation to the preferred lender usually is sufficient.

I just saw this on a listing here and the lender they required is someone I had worked with in the past and he was not the greatest.  I don't think it has much to do with pre-approvals being worthless but instead is about listing agents driving leads to their specific mortgage friends.

Sally, we just talked about this today with a buyer who was looking at an REO and they wanted their own pre-approval. Can't blame them, especially when buyers mention the name of places like Option Mortgage (shudder) who mean nothing but trouble if they are the lender and often can't fund the loans because the people end up not being qualified - at least that's what folks in the office say. I guess that's part of our new 'buyer education' 'You may have to be pre-approved twice because..." it's never dull around here, is it?

Hi Sally -- I had this happen last year with a buyer of mine, the seller demanded it, even though my buyer was pre-approved through a very reputable lender and my buyer's higher offer was rejected because he refused, and the seller lost $$ as a result.

Some lenders are unreliable and some individual loan officers are unreliable. We've all met them, they're in every city. As a listing agent I need to help the seller get an offer that is most likely to close, and close on time. I will never tell a buyer's agent where they must get the loan, but my seller can factor in the unreliability of certain lenders or loan officers, especially in a short sale situation that has very little margin for additional delays.

Aloha Sally,

"There is nothing in writing to the buyer from the seller stating that they are requiring the buyer to run their credit again and get a preapproval from a funding lender"...this is something we see in listings all the time.

This topic was also a subject of discussion at a fairly recent CRS event in SoCal, our legal counsel for CAR said the seller is perfectly within their right to make this a requirement of acceptance of an offer. Bottom line, I think we all know that some of the so-called pre-approvals aren't' worth the paper they're written on.

Sally, in California, a seller cannot make a buyer use their lender.  I find in most cases the listing agents that require a second pre-approval are not very helpful and seem not to care if they sell their listing or not.  That's been my experience.  Usually you can't even get their required lender on the phone.  So discouraging, and I don't think it is fair to put the buyer through another pre-approval.  My advice to my buyers is to find another property, but of course, it's up to them.

Good Morning Sally!  In this area,  if someone is requiring preapproval from a certain lender, it is stated in the MLS.  I just tell the buyers about this requirement, if they want to put an offer on that particular house.  And I explain about the effect on credit scores when multiple credit files are pulled within a 30-day period (it is counted as one).  There is no drama and we just proceed.  I also take the same approach as you do regarding selecting a Loan Officer.  I have several that I recommend and I will give them each of their cards.  (I keep them with me at all times).  I tell the buyer to call any or all of them as they are folks that I know do a great job at what they do. I don't pick them though!  It is up to the buyer to make that decision.

As long as there is disclosure up front in MLS that this is what the seller wants then I see no problem with it.

I've come across this situation many times in the past year, Sally. It's always listed in the agent's notes, and my buyer simply complies. But an issue I've encountered more than once is that the seller's lender is unavailable (i.e. not returning phone calls), and all offers to purchase must be submitted by a rapidly approaching deadline.  Fortunately, every time I've encountered this dilemma, the listing agent accepted my buyer's original preapproval letter.

I agree with Susan #7!  Most pre-approvals are not worth the paper they are written on.  If my buyers bring me a pre-approval letter from a lender I am not familiar with, I will ask them to get another approval from a major lender.  I will explain why and give them examples of some horror stories.  They will usually agree to go forward with a second approval. 

A seller or seller's agent can't require a buyer to use their lender, however a seller or their agent can require a buyer to get approved by a particular lender if the buyer's offer is contingent on securing financing from a lender.

When I sign a new listing one of the first things I do is get the property pre-approved. The buyer can shop for any loan they want but if they are approved by a lender that has already approved the property they can't walk and get their deposit back because their lender won't give them a commitment.

In Manhattan there can be all kinds of reasons why certain lenders won't lend in certain buildings and some will. it is customary here to submit a financial statement showing net worth all assets, liabilities and income along with a pre-approval letter. The whole financial picture is looked at before an offer is accepted. An unknown out of state lender is usually a red flag. 

I ran across this last weekend - a bank owned home that BOA said THEY had to do the preapproval on but the buyer could later get the loan from whoever they wanted - my buyer said they would hate to go through the process twice and did not want to work with BOA - so we moved on!

I see this all the time on foreclosed properties ... buyer must be pre-approved by xyz ... while I understand the bank holding the foreclosure might want to make sure that the buyer is capable of completing the deal, what bugs me the most is when the referral is to some other bank/loan offer (i.e., Bank of America is the foreclosure bank, listing agents specifies in listing that a Wells Fargo LO has to pre-approve).  Now, when it's one in the same, then I can see that the bank might be wanting to a) earn the buyer's business and b) ensure for themselves (due diligence) that the buyer qualifies.  But when it's NOT one in the same, then it's agent so-and-so getting some sort of referral fee back through his brokerage when and if the buyer buys and uses that bank on the second qualifier.

All that said, while most buyers complain about the second qualification, when they do get qualified (and they will) by the second lender, they never use the lender anyway.  I encourage them to use the lender of their choice.  Our contract of sales says that its the buyer's choice for lender, title, insurance, etc.  While I don't like it when listing agents put this requirement out there, I've always been sure that it's a listing agent requirement, not a lender requirement.   I love to hear what the chairman of BOA says about about this practice in real estate.  Or what the CEO of Wells Fargo has to say about the practice. Hmmm ... that gives me a thought ... maybe it's time to write an open letter to the CEO/Chairman's of those companies regarding this practice to determine if it is policy or policing!!!

I have not experienced this requirement before but I am glad I have thought it through in advance now because it will!

Sally - I think it's a dangerous game that agents and sellers are getting involved in more and more. Although it may be perfectly legal (and I agree there should be something in writing from the seller), my fear is that as the practice grows, it will come under more and more scrutiny. Although no one is saying you have to use that lender, there is a certain implication that comes with it. An implication of preference. My guess is that there will come a day when it gets to the point where someone will step in and swing the RESPA hammer. The fear is that with all corrections, the hammer will swing too far. Perhaps there will come a day, when we find ourselves unable to even discuss the lenders with our clients. When saying that Lender XYZ has or hasn't come through for your clients in the past becomes a violation. I'm very curious to see how things like RESPA evolve over time because of our (or others) actions. Look at the HVCC. Although we all groaned about it, there was a good reason it came about. It was meant to fix a problem - unfortunately the agents and lenders who manipulated the system of appraisals created a situation that needed to be corrected...but how? Enter the HVCC, which was designed to correct a problem in our industry, but at the same time swung the pendulum so far to one side that it created its own set of problems. We have a tendency to overcorrect. That's my fear.

As primarily a listing agent, my clients and I have requested this.  Many of my builders require this if the buyer will be making many color selection changes or choices as they want to be 100% they buyer is approved... and they want to hear those words from someone they know and trust.  I do not see a problem with the second request for approval. 

We do this up front, Sally.  We include in the listing that the buyer has to provide a pre-qualification from the seller's lender (generally a foreclosure, short sale or builder listing).  The buyer is not required to USE this lender, just get a pre-qual through them.  This gives everyone a better feel that the transaction will ultimately CLOSE!  We don't, however, tell them AFTER they've presented the Offer unless their original pre-approval/pre-qualification letter comes from a lender witn a horrible reputation (say, some that do them online, never even pulling the credit of the buyer).

Most REO sellers are going to require a Pre-Qualification from a specific lender.  They are doing this in an effort to reduce the extremely high fall out rates of actual closings.  I regularly see borrowers supposedly "Pre-Qualified" elsewhere who really don'tqualify at all and I don't see how they ever could have. 

I actually had a buyer's LO email me one day, with a cc to the listing agent no less, that her client was in the middle of getting re-scored and she was not at a 620+ yet.  She was positive it would get the score above 620 which was the minimum score for the bond program that she was doing.  This was an LO issuing a letter based on speculation of what a credit score was going to be.  Funny thing is, the buyer told me this is now her 2nd re-score since the first one didn't work.  Would you want your seller to take that letter?

I have one on my desk right now from someone who makes $2,000/month and says she has been qualified for a $200K home.  Her tax returns don't show her making over $18,000 in either of the last 2 years and there is no co-signer.  You have to wonder how she got that letter.

The ones (buyers and agents) who put up the biggest resistance know they have issues and they don't want the sellers lender to see them.  This is the red flag to us.  They know their chances of their offer getting accepted will be much less.  Some agents have even told me they don't care if the buyer qualifies now or not, they just want to get the property under contract and deal with qualifyingpart later.  That is just an agent desperate for a closing.  Do you really think any seller wants that buyer?

REO sellers want viable buyers who can actually close.  Since so many LO's still issue garbage letters, this is the only way to control the process and reduce the marketing time of their properties.

I hate it when a seller requires you to be preapproved with their own lender. Of course, you can still choose your lender of choice, but it's one more hoop for the buyer to jump thru and is it really necessary?

Here in AZ, we see this alot. Banks do not trust anyone, especially other banks. They know the swiss cheese letters, because they developed the concept! What they probably under-calculate is the showings that do not happen when the listing has this language. Many buyers will not go along with this tactic, thus it is filtered out before they hit the streets. Do the banks care? Do they even know?

On several occasion I have talked to the listing agent about this provision and the agent has relented and said they would present my client's offer without the approval from the seller's bank. 

If the buyer's offer is solid with a strong preapproval letter and Buyer's Financial Statement these "required" approvals sometimes can be avoided.

Sally - My blood is boiling. It so irritates me when the listing office, not always bank owned, requires this. If it is with my MLO of choice that the buyer has gone with, my MLO provides not only the information that a pre-approval should have, but a fully executed DU. This shows that the buyer is who the MLO says they are.

Like what Donne says sometimes they can call the "lender required" and give the DU and documents required directly so the BUYER is not inconvenienced with having to do everything all over again.

O.K. I am better now.

It's interesting to me how many agents will "pass" on showing certain houses just because extra requirements from the seller.   Bank of America is one that almost always requires that preapproval.    I couldn't fathom eliminating showing any and every B of A house, just because of extra work invovled.   I coach my buyers when looking at bank owned homes and short sales--this is THEIR game, and we have to pay by THEIR rules.  If the house appears to be an over-priced money pit, sure we'll pass it over.  But for my buyers, bank owned homes and short sales are worth the effort, in my opinion.

I'll give the Tutas' an exception -- there are SO many to choose in their market in Central FL, its probably no big deal to skip a few...

 

Wow!  We have many opinions about the situation and I think many agree on:

1) Most likely a bank owned or short sale may be requesting a preapproval from a funding lender (specified one) and we should educate our buyers that it most likely will be a possibility (especially if it is listed in the listing agreement)

2) A listing that says to preapprove with a XYZ lender and a regular sale may have a hidden agenda

3) Ultimately it is up to the seller to request...or NOT and the buyer to comply....or NOT.

I do however agree with #54..... Matt Stigliano (RE/MAX Access (210) 646-HOME) that it is a growing practice and a concern that implementing without written authorization from the seller and signing off from the buyer could cause more harm than good...without it.

 

Sally - First and foremost, Matt is correct that this has become such a problem that HUD is finally investigating this practice.  I hope you don't mind but I am including the link that TBWS recently did on this issue and how HUD is now considering on making this a RESPA violation.

Pimpin Their In-House Mortgage & Escrow Companies

Secondly, I get so sick of all the Realtors and their preferred bank lenders claiming that every other lenders pre-approval is a worthless piece of paper.  I have lost count on how many borrowers I have helped over the years because some bank rep and/or "preferred lender" screwed up some escrow so bad because of their worthless pre-approval.

Don't even get me started on the REO banks and short sale negotiators who are absolutely clueless as to what the LA is doing in regards to forcing prospective buyers get pre-approved with their (the LA's) "preferred lender".  For the record folks: it is a RESPA violation for MLO's to provide anything of value to a Realtor for the exchange of referrals.  Any MLO engaging in this type of conduct is at risk of losing their license.

As someone mentioned earlier, here in CA there has to be a written authorization from the seller and/or bank stating that they are requesting this particular process and, of course, any BA asking for a copy of that authorization automatically gets dismissed and/or ignored.

WOW...Like you I insist on a preapproval letter and also some discussion with the lender but having an agent get a 2nd approval and forcing it to be with a particular lender is ridiculous and may even represent some sort of conflict. What if the 2nd approval is not accepted or worse accepted and then falls trough because of actions by the 2nd lender. This is making my head hurt thinking about the possibilities!

I never liked the practice of requiring second approvals, still don't.  Especially on REOs, this is the real estate industry handing over one more level of control.  I dare say that this requirement often inhibits the sale...I thought the listing agents job was to SELL the house and create no barriers?  Tongue in check!  Snark Snark

it is none of the other agents business, if the buyer is approved, by a qualified lender, it is all that is being disclosed, if the sellers agent does not want to present the offer, my next call is to his/her manager, to request intervention for breach of duty (as in present all offers)

And yet no one made mention if the lack in fiduciary responsibilty and confindentiality to your client since once you have them pre-approved through the listing agent's lender that agent/broker now knows what your clients buying power is and now their negotiation position is compromised.

Unless it's specifically an REO listing, I would advise my clients to make the offer minus their unneccessary pre-approval, and in this market any agent that would still refuse to allow me to present my offer is foolish. Further more if they don't have the required documentation by the NWMLS and they still refuse to present my offer will discover how quick I will go to the Seller directly...

I see this on REOs very frequently and it is becoming a part of the new landscape of real estate. 

Let's put aside REO's or short sales.  It is not Mr. and Mrs. Seller who are choosing the lender for the 2nd approval, it is the listing agent who does this.  This raises all sorts of conflicts and fiduciary problems.  In other words, the listing agent is becoming part of the lending process.  This is not a good idea.  Could not  the seller sue the listing agent if the lender of choice refused to qualify a qualified buyer?  Could the buyer do the same?

These are some things to things to think about......

Comment #70 negotiation position is compromised

Comment #64 Pimpin Their In-House Mortgage & Escrow Companies

Comment #67  may even represent some sort of conflict

Comment #68 I thought the listing agents job was to SELL the house and create no barriers?  Tongue in check!  Snark Snark  (I especially loved this for the snark snark lol)

Comment #72 This raises all sorts of conflicts and fiduciary problems

With all the bogus loan approval letters I have seen from mortgage brokers, asking for a letter from the funding lender is not unreasonable.  The broker they are using can send it to the funding lender they are planning to use and have them review it.  This makes their offer stronger and helps prevent both the buyer and the seller from going through preventable pain later.

Aloha Sally,

You've got so many comments on this one, I didn't get quite through them all.

This is a topic that came up a week ago at our SoCal CRS meeting when when had the CAR legal counsel as our speaker. It's well within the right for sellers (and we know it's ususally at the suggestion of their agent) to make that request, just as anything else stated in the lising.

Some times we can work around it, yet other times it involves another phone consultation. I agree with Lenn when she says it's also about preparing our buyers.