March 8, 2007 at 11:24 pm · Filed under Friendly Fire, Sparks from Sparky
Friendly Fire is a series of articles with one topic and two viewpoints.
Sparky has all the usual hangups of a
Realtor® and
Buckwheat has all the usual attitudes of a Loan Officer. These two viewpoints are often at odds with each other which tends to create a lively debate. These articles are co-authored by
Buckwheat and
Sparky.
Okay, Buckwheat! Why is it that whenever the market starts to slowdown to any great degree, mortgage lenders literally start crawling out of the woodwork? Seriously, when the market is good and moving briskly, you never see one. They don’t return your phone calls. They have ‘enough’ business, thank you very much. But as soon as the market takes a turn for the worse, Realtors® are suddenly inundated with solicitations, and you’re everyone’s ‘best’ buddy! What gives?
The short answer? Desperation and Enthusiasm!
When the market is brisk, Loan Officers, much like Realtors® can be found on every street corner. Kitsap County in particular has seen a huge increase in the number of both Loan Officers and Realtors these last five years. Rising property values and aggressive loan programs have made Loan Officers with little experience, overnight heros. In addition, it’s pretty common for new Loan Officers to be told they need to prospect Realtors® if they want to have long term success. You can probably expect to see a resurgance of the old “Dougnuts & Rate Sheets” type visits from Loan Officers.
Right now as you probably know, sub-prime lenders are disappearing at an alarming rate. The pool of Lenders is shrinking while the pool of buyers is increasing. The pool of buyers is increasing because fewer of them qualify for mortgage loans. When home prices rise, fewer buyers can qualify to buy them. Fewer loan closings equal desperation in Loan Officers.
The enthusiasm comes from a situation Lender Account Executives create. Often, Account Execs visit Loan Officers and tell them all about the newest and greatest Loan Program that is available. Younger Loan Officers, believing the hype, get excited about helping buyers into homes. And they want to tell everyone about it. They want to share their excitement. Here’s and example for you. Last week I heard this pitch in the office next to mine: “Your borrower’s credit score is too low to qualify? Don’t worry about it! We have a program that allows you to use the spouse’s credit score instead! Even if the spouse doesn’t work.” Needless to say, that Loan Officer was brimming with enthusiasm and grabbed for the phone as soon as the Account Exec left the office.
Let me ask you a similar question. Why is it that Realtors® treat Loan Officers like the mold on the cheese (something to be pared away when nobody is looking, so you can get to the useful stuff in the middle) when times are easy, and like the Loan Officer’s best friend when times are tough? I’ve had more lunch offers in the last 6 months than I received in the previous 3 years combined. At each lunch, I was eventually presented with a difficult loan scenario and asked if I could help. Realtors® know that some loans are very difficult and others are very easy. Do they really think that offering the promise of a string of tough loans is going to excite a Loan Officer? “Hey Mark, you can’t have any of my clean files because those go to my regular Loan Officer, but how about I send you all of my hard ones from now on?” Don’t they understand that their ‘regular’ Loan Officer isn’t getting the job done? Their ‘regular’ Loan Officer is just cherry picking!
By the way, do you want to be my buddy?
Boy! Can we just elect to take the ‘short‘ answer please? Sheesh, talk about being a little ‘chatty!’ How many pots of coffee did you drink this morning?
First off, I personally don’t consider any Loan Officer to be ‘mold’ on the cheese (although a few have acutally smelled that way). However, I do place a tremendous value in my lending partners. Like us Realtors®, a good, knowledgeable, ethical, hard-working Loan Officer is worth their weight in gold. Whenever I recommend a Loan Officer, I want someone to whom I can fully entrust the care and service of my clients. I want someone who does business like I do - someone who embraces, with the same fervency, the relentless pursuit of their client’s best interests, and possesses high ethics and integrity in the marketplace. Great rates and creative programs are secondary. Be honest, straight-foward, communicate well, treat people fairly and ethically, and you’ll never be ‘moldy’ cheese in my book. (Boy, how’s that for being ‘chatty?’)
Back on topic: I guess my point is, where were all these Loan Officers when things were going so good? Was my business and support not important or wanted or necessary for them then? Why all of sudden have I become their ‘Best’ buddy? Why do I find piles of notepads, pens, and cute little greeting cards littering my inbox? Why are they calling me like some long lost relative who they just can’t wait to see again? At least you’re getting a free lunch!
(I will concede, however slightly, that there are times when Realtors® are faced with a challenging transaction, and desperately need a ‘miracle maker’ to save the deal. Loan Officers who eventually accomplish the impossible and ’make’ it happen should be rewarded with future opportunities, not just the tough loans.)
Define ‘Buddy’
January 23, 2007 at 6:02 am · Filed under Friendly Fire
Friendly Fire is a series of articles with one topic and two viewpoints.
Sparky has all the usual hangups of a
Realtor® and
Buckwheat has all the usual attitudes of a Loan Officer. These two viewpoints are often at odds with each other which tends to create a lively debate. These articles are co-authored by Buckwheat and Sparky.
Buckwheat Sounds Off
Why do Listing Agents feel the need to interfere with a Veterans’ right to a VA Loan? It is a common scenario.
Many MLS listings make it clear that VA financing is not welcome. Rarely is this because the homeowner requested it. Invariably it is the listing agent’s distrust that instigates the caveat.
VA borrowers go to a loan officer expecting to use their government granted right to a VA loan. They usually have a fairly good understanding of the benefits a VA loan offers. They rarely have a bank account full of cash because our government is not known to overpay the guardians of this country. And they never expect a seller to turn up their nose at government guaranteed money.
VA homebuyers are frequently shocked to find out that many homes are not available to them because the seller will not consider VA financing. Is it the seller who refuses to consider VA financing? No, almost always, it is the sellers’ agent. In most cases the listing agent gives the seller misinformation concerning VA loans and thus convinces them it is not in the sellers’ best interest to entertain offers from buyers using VA financing. Yet in conversation with these same agents, they will tell you with obvious pride, they view their fiduciary responsibility to their seller as a great responsibility.
The most common reasons I am given by agents who wish to avoid selling a home to a VA buyer are:
- The appraisals always come in low (Is the appraisal low, or is the property overpriced)
- The VA inspector picks the house apart (There is no such thing as a VA inspector)
- The buyers don’t have any money (So what? Many conventional borrowers have none)
- The seller has to pay more fees (That’s true, about $400! Let’s blow a deal for $400)
- VA loans take longer to close (The fastest closing I had last year was VA. It took 17 days)
None of these reasons have any merit. All of these reasons are rooted in the agents unwillingness or inability to acquire accurate knowledge. This, I presume, is because they take their fiduciary responsibility so seriously.
Well Sparky, care to defend the Realtors®? Is there any defense?
Sparky Sounds Off
Okay, Bucky, as “Ask a Ninja” says, “Gauntlet thrown down, gauntlet picked up!”
You’re absolutely right. There is a sizeable segment of real estate agents out there who deliberately counsel their Sellers NOT to entertain VA Buyers. And some probably don’t even take the time to discuss the matter with their Sellers and simply fail to check the “Available for VA Financing” box on the MLS data entry form.
Almost every seasoned, experienced real estate agent at one point in their career has had a bad experience with a VA Buyer. I would suggest that for many real estate markets, encountering Buyers using a VA loan are an exception. However, in markets like Kitsap County, where you have a very substantial military presence, VA loans are very commonplace.
I myself have had several deals fall through, primarily because of VA appraisers (I’ve posted on this topic before). One of the difficulties in our area with VA loans is that the appraisal process is like playing Russian Roulette or Forest Gump’s Box of Chocolates - “You never know what you’re gonna get!” Whoever is next on the VA approved vendors list, gets the job of appraising the home. Many times it’s an appraiser from outside your market. In our area, even just a few miles can make a huge difference in price valuation.
Why can’t VA allow “area-based” appraisers to participate? Why are we subjected to this “Hit and Miss” approach?
Buckwheat Bites Back
I can empathize with you about having deals go bad.
But, it concerns me somewhat that you are seeking inspiration from “Ask a Ninja”. Is this one of your continuing education resources? That would explain many things about the level of professionalism I see in some of your real estate compatriots.
After having handled dozens of VA loan transactions, I can only think of one time that the appraiser blind-sided the deal. Even then, VA has a system in place to challenge a VA appraisal. As a matter of fact, one of the Realtors in your office successfully challenged a VA appraisal. It happens so rarely, that you just don’t hear about it.
The VA process for chosing an appraiser has been a hotly debated topic for years. So far there are no indications of change on the horizon. And just because a system ocassionally fails, is not a good argument for boycotting. The vast majority of VA transactions go just as smoothly as conventional transactions. The realtors who guide their sellers away from VA buyers, are eliminating a large pool of buyers. In many cases the realtor makes this decision for the seller, without the sellers awareness.
Real estate agents seem to think VA loans are just too much trouble. My question is, aren’t they being compensated to take that trouble on behalf of their clients? Does that not define, to some degree, fiduciary responsibility?
Sparky Bites Back
There’s some very sage advice from “Ask a Ninja.” At least I don’t have to put my license number on my business card!
You wanna talk about “Blind-Siding Appraisers?” I had a VA Buyer (young Navy couple with a cute little boy) desperately wanting the home-ownership dream. It was challenging to find them something in our market within their budget. We finally found a VA repo (a fairly new manufactured home on a 1/2 acre) and successfully won the bidding process. Everything was looking great. The appraiser came out and proceeded to critically analyze every detail and to call out a boatload of defects. And we’re not talking about structural concerns, or primary system defects, or safety-related issues. The majority of conditions were cosmetic. And, of course, all conditions were required to be corrected PRIOR to funding. My Buyers were cash-strapped as it was. There was no way they were going to be able to afford all the repairs called out by the appraiser. So we had to back out of the transaction. And guess what? The property sat vacant on the market for several more months, as VA continued to lose money!
And getting back to my earlier point about “Out-of-Area” appraisers…why is it, that in all of my years of real estate, through all of the transactions I’ve been involved in, that the ONLY deal I’ve had where the property didn’t come in at value was with a VA appraiser? And we’re not talking a few dollars, it was over $15,000 below value! The appraiser came over from Kirkland! He was totally clueless about our market here. Last time I checked, there weren’t any Microsoft Execs in West Bremerton! We spent several days going back and forth with suitable comps. I don’t know how the Lender finally pulled it off, but we got the numbers to work, but not without a lot of grief and lost sleep!
Let’s put the shoe on the OTHER foot, Buckwheat! Are there Mortgage Brokers out there who purposely steer VA Buyers away from using a VA loan, not because another loan product is necessarily a better fit for them, but because the Broker can make more money using a different loan product? Hmmmm????
Buckwheat’s Last Bite
Let’s start with your last, and weakest, point first.
Somehow, the Lender closed the deal. It cost the Realtor® some time, some grief and some sleep! Oh my, that’s a great reason to avoid VA transactions! It certainly sounds like the clients’ best interest are the top priority here. You make my argument for me. We, Realtors® and Loan Officers alike, take on the responsibility of caring for our clients’ best interests when we agree to work with that client. This is not optional behavior for a professional. Yet, because a little sleep might be lost, or because of a difficult transaction in the past, an agent will guide a seller in a direction that eases the life of the agent, but does not automatically benefit the seller. Something is seriously flawed with that line of reasoning.
Let’s apply that line of reasoning. Did you enjoy paying your taxes last year? Well then, don’t pay them this year. Do you lose sleep when a child misbehaves? Just let them misbehave then. If your dog bites a neighbor, it causes you grief. Oh well, let Cujo do what he wants, because it’s just too much trouble. I hope you get the point.
The responsibilities of Realtor®s and Loan Officers include education and research. We are supposed to find the best solutions available to our clients. Then we are supposed to present that information to our clients. VA financing is frequently a viable solution. I don’t challenge your statement that VA Loans have their own set of issues. I challenge the right of a Realtor® to decide for a client what is best for the client, without educating the client first. The benefits and the disadvantages should be presented to the seller in a clear fashion. And the seller should be allow the dignity of making his or her own decision. The property belongs to the seller. If the property does not sell, it is the client that gets hurt, the Realtor loses nothing but time.
Your issue about out-of-area VA appraisers is a valid point and I won’t attempt to argue it. It is the primary flaw in the system. It should be changed. It has not been changed. It is the nature of the game. It has little bearing on the fact that by offering to sell a home with VA financing, the Realtor® increases the number of potential buyers for a property. And THAT is the Realtor’s® job.
In addition, using your example above, the appraisal was corrected to more accurately reflect market values in this area. That happened because VA has a system in place to address that problem. And that part of the system works. A little extra labor on the part of the Agent of the Loan Officer should be shrugged off. A little extra labor is entirely irrelevant.
As to your last point; yes, Loan Officers are guilty of the same thing. It is just as inexcusable for a Loan Officer.
Sparky’s Last Bite
Well, at least you’re willing to admit that both Realtors AND Loan Officers are equally guilty!
I totally agree that as real estate professionals, we exist to serve and represent our client’s best interests. But our experiences, good or bad, help to shape the advice and counsel we provide them. So when I am working with VA Buyers, I explain to them the potential pitfalls associated with that particular financing product.
When I represent Sellers, I provide them with information on what is involved in offering their home to VA Buyers. I never deliberately or intentionally discourage anyone from using VA financing. As a Listing Agent, why would I want to limit the pool of potential Buyers by NOT offering the home to VA Buyers? Unless, of course, I know that there is something obviously wrong with the house that would make it extremely difficult to qualify for a VA loan. Even then, am I the one most qualified to make that determination?
My job is to sell the house, for as much as the market will bear, and in a reasonable amount of time. As a real estate professional here in Kitsap County, many of my clients are Active Military. Some of my most enjoyable transactions have been with VA Buyers. My first two homes were purchased using a VA loan. At the time, it was the only way I could have afforded a home.
Regardess of the difficulties associated with VA loans, ultimately, if it benefits the client, we should put our jaded experiences aside, and do what is best for our clients!
