When I am screening listings for my clients, there are a number of things I look at. When buyers are on a tight schedule, I don’t include short sales, because there is no telling if or when they will close. Unless my client is a licensed contractor, I don’t send listings that have warnings about mold infestations or other health/safety hazards. There are a number of other “red flags” I look at, because my client’s time is valuable. I am not going to waste his or her time on a home that won’t be suitable, or that they can’t buy, or that they can’t get in to see, or that will be a big headache later.

Because time is so valuable, I make sure that buyers start the process by getting a pre-qualificaiton from a reliable lender or mortgage broker. Not only do we need this before we can put in a credible purchase offer these days, the “pre-qual” tells us both up front exactly how much they can afford. If the client wants to stick to a lower price range, that’s fine; but if they want to go above the price on that pre-qualification, I know we need to clear it with the mortgage people first. I don’t knowingly show people homes they can’t afford.

And this brings me to one of the biggest “red flags” I look for in a listing, a requirement that my clients have a second pre-qualification through the seller’s chosen lender. “Must pre-qualify with [insert bank name], no exceptions”  in the agent-to-agent remarks means my clients aren’t seeing that listing, ever.  Here’s why:

My clients are already qualified, thank you. The official line is that they are merely trying to protect themselves from disreputable or fly-by-night mortgage companies. Sorry, I have already screened for that. Don’t insult me or the mortgage professionals I work with every day.

A second pre-qualification costs money. It is my personal opinion that what these companies really want is the $200-500 they will get for an application fee.  If they get a mortgage out of the deal? Bonus.

A second pre-qualification involves a second credit check. This additional inquiry has the potential to cause slight damage to my client’s credit report. If there were anything “borderline”, this small change could jeopardize the first pre-qualification and my client’s ability to buy.

A second pre-qualification takes time. Every week there are dozens of homes in this market that don’t spend a whole week on the market before having an accepted purchase offer, often with multiple offers. See Friday Figures for an exact count each week. The days (or weeks in some cases) it takes to get a completely unnecessary pre-qualification may mean the difference between buying, or having to wait for the next home that suits the client.

It drives a wedge between my clients and myself. Part of the game is that the new lender has the opportunity to talk my client into using their mortgage services. If they can do that, they rack up a nice set of origination fees, and a bunch of interest for as long as they hold the note. Since odds are very good that I won’t know their representative personally, this complicates the entire escrow period because I won’t have the same level of communication and rapport that I do with my small circle of mortgage people. I can’t stress enough how critical this can be in the last week before a sale closes. That’s when things are most likely to go wrong, and when I most need to be able to speak frankly with the mortgage people.

And finally, The other bank or mortgage company isn’t that great either. Specific pre-qualification requirements only happen on distressed properties, almost always bank owned homes. At least 9 times out of 10, the “required” company is the one that got burned on the mortgage last time. Usually, it’s the bank that owns the now-foreclosed property! If they were such a great judge of people’s ability to repay a loan, they wouldn’t be in this mess in the first place.

There is a movement to prohibit this asinine practice. You can sign a petition to amend a law called RESPA to make it illegal by clicking here. Better yet, you can send a message to your elected representatives in the House and Senate.

In the meantime, I won’t be showing listings that require a second lender’s pre-qualification.