Posted by: Nick Fundytus

Question of the week:

Is it normal for realtors and their preferred lenders to bash on big banks?

I have been considering buying my first home and have my eye on a property. I shopped with different lenders and the best offer I got was with Chase. They were willing to lock in the rate with a float down renegotiation within 30 days of closing, and also a grant for 5k.

Throughout the process, my realtor and his preferred lender have bashed big banks. They say the big bank underwriting process is horrible, there are surprises that pop up, I get a worse rate for extended rate lock, and that they don’t want me getting surprises.

My realtor even said that I should wait to shop lenders again when it is abt 45 days out of closing (I’m looking at a November for closing) and that I’m getting penalized for going with a conventional loan. He wants to make sure I “know what I’m getting into.”

I personally feel like I’m just being gaslighted into going with the preferred lender because they can’t match the offer Chase is giving me.

Is this normal behavior? I’m honestly just considering dropping my realtor and switching to another. I was ready to make an offer on a home with him but the last phone call was honestly the straw that broke the camels back making me doubt myself.

FYI — He is childhood friends with his preferred lender.

Any advice would be appreciated!

Nick's Answer:

TL:D,

No, it’s not normal or professional for your Realtor to do this in particular. As for their preferred lender, they only get paid if you work with them but it certainly seems that they’re taking the low road by disparaging your other options. There is more nuance to the answer, which I’ve added below.

This question was posted on r/RealEstate and is from an American perspective. Keep in mind that the banking landscape is very different there, with a huge mix of big, medium and small banks, private lenders, and more. I lived in Kentucky for three summers and the bank that my paycheques were deposited in had three whole branches. It only operated in that tiny town, and unless we used a Visa card we couldn’t pay for anything out of state without cash. Compare this to Canada’s Big 5 banks that dominate the vast majority of activity in the country, plus monoline lenders that together make up the vast majority of how Canadians get mortgages. 

Here, it mostly comes down to the banks’ own mortgage “brokers” (not always licensed brokers) and independent mortgage brokers in how Canadians arrange their mortgage. The actual mortgage is still underwritten by those Big 5 banks or monoline lenders. The only difference is who you’re dealing with as a buyer.

On our team, we don’t bash any specific type of mortgage professional. The goal for us is to make sure that you get a mortgage at terms you’re comfortable with. That said, I have found over the years that independent mortgage brokers tend to have higher levels of certification, broader knowledge of the mortgage landscape, and their interests are more in alignment with those of our clients (as opposed to a bank lender who may get bonused on selling you a higher rate). They also tend to have greater hours of availability and can help our clients shop around to their various options. I encourage our clients to interview both mortgage brokers and bank representatives and work with whoever fits them best. My personal recommendation list is short and only has mortgage brokers on it. I also keep a short and confidential list of “bad” brokers and reps that have screwed up things for clients in the past that I will warn my Buyer clients about if they are considering them.

Banks will sometimes hold sales on rates if Buyers work with them directly. When that ends up being the case, our client may work with the bank and it goes great. In these cases, if the client has already spoken with a broker, a good mortgage broker will admit when they can’t beat that rate without bashing the bank. A great mortgage broker will read over the documentation with them anyway to make sure that it represents our client’s best interest. A great mortgage broker knows that what’s important is the result for the client, and working as a team so that they get the best result and service. 

On that last note, a big shout-out to my colleagues Kristin Stauffer and Chris Allard in Ottawa. They’re both amazing mortgage professionals and I’ve seen them do what I described above, and I think it’s a big part of why they get recommended so much here in the capital.

I hope that helps!

Source: I’m a Realtor in Ottawa, Ontario.

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