Big Banks And Out Of Town Lenders Could Cost You Big

Big Banks And Out Of Town Lenders Could Cost You Big

Recently, I was helping a client purchase her first home. She had chosen USAA as her lender because of the stellar job they did for her in other areas, such as car insurance and banking.

I explained to her that we would most likely be in a competitive situation and that using a bank like USAA, Chase, Wells Fargo or BOA will make our offer look weaker to the listing agent.

I told her that as agents, we all know that banks often don’t close on time, sometimes not at all. When we see “Wells Fargo” for example, on an offer, we cringe. I explained that the best option for her was to use a local lender, but she had made up her mind to go with USAA.

So after some serious looking, the perfect little bungalow came on the market in south Austin. It was gorgeous, well kept and surprisingly, a bit underpriced.

As you would imagine, there was a bidding war, 7 offers came in on this property on the first day. While we had the best offer, the listing agent had a serious problem with the fact that we were using USAA for the lender. We were extremely lucky, because I was actually able to get someone from the bank to talk with the listing agent and assure them that the deal could be closed on time. The seller accepted our offer and we began going through the process, inspections, appraisals and so on.

Being nervous about our lender, I called into USAA every 3-4 days just to make sure everything was moving as it should be. Every call I made ended with “Yes, everything looks good’.

The day before the closing we hear from the bank... “Yeeaaahh... were not going to be able to close on this home for another week or so”.

So, I contacted the listing agent right away to explain what was going on. The listing agent basically said “tough luck”. In other words, the listing agent wanted to keep my clients earnest money and go to the back up buyer they had in place.

That wasn’t all; keep in mind that my client had already paid for an inspection ($400), an appraisal ($430) and had to be out of her apartment in 4 days.

Ok, so needless to say my client was about to have a heart attack. Fortunately, I was able to convince the listing agent that doing this to my client would be a really bad idea. How? That’s another story entirely and one I would probably only tell you in person...

So my client got lucky. We were able to close a week later and all was good. But my client probably doesn’t realize how close she came to disaster. I was able to protect her on this transaction, but had the situation been different I may not have been able to keep the deal together and my client would have lost big.

So what’s the lesson here? Banks and credit unions are flat out dangerous to use when buying a house in the type of market we have in the greater Austin area. This includes Buda, Kyle, Round Rock, Cedar Park, Dripping Springs, Georgetown, Leander, Liberty Hill and so on. Multiple buyers, means sellers have options and don’t have to accommodate the mistakes of your bank. The reality is that the majority of sellers and listing agents are fairly reasonable people in these situations and will work with you if there's a delay, but not all always.

So am I saying this happens to banks and credit unions and not local lenders? No, a delayed closing can happen with any lender of any type, but from a percentage standpoint, local lenders are far more likely to get the deal done on time. And if they can’t, the good ones are going to jump on the phone with both agents, days in advance, to make arrangements and keep the deal together.

Here’s what you have to keep in mind... the person(s) we were dealing with at USAA wasn’t paid on this deal going through. They were being paid hourly and were probably overworked with 25 plus loans to process that month, instead of 3. There was no incentive for them to get the deal done on time or help keep the deal together when a problem arose... they get paid either way.

Local lenders work on commission... sounds bad right? It’s not. If they don’t get the deal done, they don’t get paid. There is a huge incentive for them to preform.

Plus, local lenders have a lot more skin in the game than a bank or an out of state lender. Lenders around Austin rely on agents to bring them 80+ percent of their business. So one bad experience could equate to many, many lost deals if the agent stops bringing them clients.

I will say this, if you are going to use a lending institution and not a lender for your loan, use someone like UFCU. Better yet, just shoot me an email and I’ll send you my list of top lenders and credit unions around town. Just make sure you let me know what type of property you are buying (land, house, condo, commercial), because I’ll recommend different lenders for different types of properties.

Patrick Jbeili Headshot
Phone: 512-970-8002
Dated: June 18th 2015
Views: 250
About Patrick: ...

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