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Old 06-04-2014, 09:15 AM
 
Location: My House
34,937 posts, read 36,163,891 times
Reputation: 26547

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Quote:
Originally Posted by KGRW View Post
I'm a RE attorney and you know this because we have had conversations like this before. I close hundreds of homes each year, many with builders and many with the builder's preferred lender. I have simply not witnessed what you are alluding to above. Most closings with the builder's lender are smooth and without issue. The builder's lender has a vested interest in making sure the home closes on time. Outside lenders are the ones that typically don't get the loan packages submitted in time and the buyer is left without the keys. I see this happen all the time and the sad thing is that the buyer is the one that is most impacted in the end. I have not seen unfair lending practices from preferred lenders or builders taking advantage of buyers so I'm not sure where you are getting your information.
Actually, I'd forgotten what you do. I moderate more than one board here and the other one is very busy.

You may close these, but do you have any idea if the buyers could have gotten a better deal if they'd gone with another lender or had used an agent to deal with the builder? That is pretty much what I meant. I know people who could have gotten a better deal by using their own financing, much like the other posters have described further up.

I do think that it is more likely that someone will get taken advantage of with a gigantic, national builder (and no agent) than they will with a local builder that has a solid reputation, but even then, there are SO many particulars and if one does not have the building savvy to know what all of them are, how will they ever make it into the purchase contract.

Example: Exactly WHAT type of crown molding is in that house? How many coats of paint again? Are those numbers specific for the carpet and padding that will be installed? What about the hardwood finishing?

Just too many issues to assume that the average buyer (especially a first-time buyer) will think of them all.

Also, the lending thing? Yes... they do sell those loans immediately in most cases. And not always to a lender that the owner will enjoy working with.

Does this mean that there's foul play going on? No. Absolutely not. And of course the builder wants the house to close in a timely manner. They want to get paid. I cannot fault them there.

I would hazard a guess that you, as a RE attorney, know far more about contracts and home purchases than the average buyer. So... in sales, the average buyer who is not a RE lawyer, without a good buyer's agent is going to look like an easy mark compared to one that comes with a good buyer's agent. The buyers who have bought and sold (and built) a good number of houses may be able to do without, of course.

The way the OP described the situation, it sounded like the builder was being a bit aggressive about the use of their lender. This would put me off right away.

But, that's just me. I don't expect everyone to agree with me. Nor do I expect everyone to say my opinion/advice on a given issue is horrible just because it doesn't apply to them in particular.
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Old 06-04-2014, 09:54 AM
 
Location: Raleigh, NC
5,825 posts, read 6,888,620 times
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Quote:
Originally Posted by RedZin View Post
Also, the lending thing? Yes... they do sell those loans immediately in most cases. And not always to a lender that the owner will enjoy working with.
Aren't almost all loans sold 5 minutes after closing, usually to a giant monster megabank like BoA, Chase, Citi or WF? Out of the last 5 times I have re-fi'ed, the only time mine wasn't sold was with BB&T.
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Old 06-04-2014, 10:24 AM
 
Location: My House
34,937 posts, read 36,163,891 times
Reputation: 26547
Quote:
Originally Posted by don6170 View Post
Aren't almost all loans sold 5 minutes after closing, usually to a giant monster megabank like BoA, Chase, Citi or WF? Out of the last 5 times I have re-fi'ed, the only time mine wasn't sold was with BB&T.
Not if you get yours through a credit union, which is a viable option if you're not using the builder's lender.

Also, if you have relationship banking with a place like BB&T or some other small bank, you aren't as likely. If you get your loan from a mortgage broker, you don't know where it's going to go, but you can be reasonably assured that the broker is trying to get you the absolute best rate, particularly if that broker comes highly recommended.

We bought a home once using the builder's mortgage company. Was sold immediately to Wells Fargo. Not that this is always a bad thing because we got a good refi through WF shortly afterward for a much lower interest rate.

This was many years ago. First home bought. Learned my lesson there.
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Old 06-04-2014, 12:10 PM
 
Location: Raleigh, NC
12,475 posts, read 32,189,719 times
Reputation: 9450
Here is the reality...

You CAN buy a new home without a Realtor. Not sure why you'd want to since you are NOT paying the 2.5% (average) that the Realtor gets.

No, you are NOT saving that 2.5% since it does NOT come from the builder's funds. Every builder puts 5% in a marketing account. 2.5% goes to the buyer's agent. 2.5% goes to the onsite agent (unless builder has separate agreement. sometimes the onsite person is not a Realtor but just a sales associate) and 1% goes to the developer.

Builder/developer knows that maybe 8 out of 10 buyers will have Realtor so the marketing fund is appropriated that way.

Marketing fund also pays for advertising and any broker functions.

Yes, you may find what the last few homes sold for but you may be missing something. Sometimes if Realtor gets a good deal for buyer, onsite agent takes that home out of MLS. Is this legal? Ask KGRW. Is it ethical? I don't agree but they do it. I KNOW they do it as I've sold those homes!

Realtor is another set of eyes and ears. I could tell you story after story of what has happened that was a concern to buyer and agent has to step in to make it right. Does builder want happy buyer? Of course. Does builder want happy Realtor? YES! No builder wants agents to go back and speak poorly of them or to tell 2,000 agents how bad they were to work with.

As for using builder's lender. That is fine. Find out how much incentive you are getting and then have your agent look at the good faith estimate to see what the rate AND FEES are. If they are higher than agent thinks, get another quote from another lender. Yes, builder's lender WILL match those lower rates and fees but you have to ASK.

Soooo many misconceptions with using builder's lender and builder's attorney. Just from reading these, I can tell you that most buyers should NOT buy new construction with an EXPERIENCED agent to assist them.
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Old 06-04-2014, 05:58 PM
 
Location: In between 440 and 540
226 posts, read 609,227 times
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Quote:
Originally Posted by VickiR View Post
Here is the reality...

You CAN buy a new home without a Realtor. Not sure why you'd want to since you are NOT paying the 2.5% (average) that the Realtor gets.

No, you are NOT saving that 2.5% since it does NOT come from the builder's funds. Every builder puts 5% in a marketing account. 2.5% goes to the buyer's agent. 2.5% goes to the onsite agent (unless builder has separate agreement. sometimes the onsite person is not a Realtor but just a sales associate) and 1% goes to the developer.

Builder/developer knows that maybe 8 out of 10 buyers will have Realtor so the marketing fund is appropriated that way.

Marketing fund also pays for advertising and any broker functions.

Yes, you may find what the last few homes sold for but you may be missing something. Sometimes if Realtor gets a good deal for buyer, onsite agent takes that home out of MLS. Is this legal? Ask KGRW. Is it ethical? I don't agree but they do it. I KNOW they do it as I've sold those homes!

Realtor is another set of eyes and ears. I could tell you story after story of what has happened that was a concern to buyer and agent has to step in to make it right. Does builder want happy buyer? Of course. Does builder want happy Realtor? YES! No builder wants agents to go back and speak poorly of them or to tell 2,000 agents how bad they were to work with.

As for using builder's lender. That is fine. Find out how much incentive you are getting and then have your agent look at the good faith estimate to see what the rate AND FEES are. If they are higher than agent thinks, get another quote from another lender. Yes, builder's lender WILL match those lower rates and fees but you have to ASK.

Soooo many misconceptions with using builder's lender and builder's attorney. Just from reading these, I can tell you that most buyers should NOT buy new construction with an EXPERIENCED agent to assist them.
I certainly agree that a buyer's agent can provide a lot of value to the buyer and can help be that extra set of eyes and ears. I would look to the RRAR and the REC for a legal ruling on MLS practices. If agents are removing listings from MLS and this is widespread knowledge and they continue to do so, then I can't see how it's illegal. Ethical? Well that depends. If it is a builder that sold a home in a neighborhood where they are still building and that home sold for a lower than average price, I imagine they would want to remove the listing so it didn't lower future comps in the neighborhood.

As to working with the builder's lender and selling the loan, yes this happens virtually right away. Obtaining the loan in the first place is usually the difficult part. Once you have secured financing and closed on your home, what difference does it make who holds the loan? The terms and rate don't change when the mortgage company sells the loan. Other than sending them a check each month, what other interaction do you have with them? I suppose a) maybe when you want to refinance b) you go to sell your home c) you decided on an ARM or other adjustable mortgage where terms are re-set at a date in the future d) you miss payments or a chronically late) or e) they also offer you free checking and you decide to take them up on it. I just don't see the big deal with who holds the loan.
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Old 06-06-2014, 04:32 PM
 
Location: Raleigh, NC
4,490 posts, read 3,698,075 times
Reputation: 5254
Thank you everyone for your great suggestions and comments! Always a wealth of information here. I'm just finding hard to pick a neighborhood and builder since this will be our "foreverhome" and also don't want to wait too long because all of the land in West Cary will be gone and interest rates will go up at some point!
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Old 06-06-2014, 06:09 PM
 
18 posts, read 130,341 times
Reputation: 26
Like everyone said the builder has to pay your buyers agent. We had experience buying both ways with and without an agent. When buying without an agent we did find that we had a little more room to negotiate. And when buying with an agent the builders agent did say that since you guys are using an agent there might not be as much margin which i guess is understandable. But in the latter case we were not sure where to buy so our agents suggestions proved very very useful. You cannot beat down the knowledge that the agents have. In your case since it is a forever home i would say definitely use an agent. Also there is a cemetery next to saxonbury, so keep that in mind while choosing a lot if that concerns you. Again if you have an agent he might be able to advice better about resale, property value etc.
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