A new survey from Campbell Communications and Inside Mortgage Finance Publications revealed that real estate agents hold sway when it comes to choosing a lender.
In fact, the survey claims 45% of buyer decisions regarding which lender to go with are controlled or influenced by real estate agents.
So instead of shopping around for the best deal or using a family/friend’s referral, many home buyers instead follow the lead of their real estate agent, for better or worse.
The Mortgage Bankers Association expects home purchase lending to increase from $503 billion in 2012 to $585 billion this year.
And you better believe that banks and lenders will want to align with real estate agents to ensure they get as much of that business as possible.
After all, refinance activity is expected to slow tremendously, so they’ll need to make up for that lack of business elsewhere.
Agents Prefer Quick and Reliable Lenders
The survey also noted that real estate agents prefer speed and reliability above all else, meaning they might not have a borrower’s best interests in mind.
Sure, it’s better to close than not, but at what price to the borrower? A preferred lender may be quick, but also offer mortgage rates a .25% to .50% above the competition.
And even then, there may still be hiccups, regardless of the relationship.
Real estate agents also indicated that they were big on meaningful status updates, seemingly to ensure loans close on time without delay.
This is especially important in today’s market, seeing that loan origination staff appears to be constrained, and demand is on the up and up.
In fact, two-thirds of the nearly 2,000 agents that responded to the survey said they wanted mortgages to close in 30 days or less.
That can be a tall order at the moment, given the fact that the average purchase transaction has been taking around to a month and half to close.
But there are certainly lenders who move quicker than others, and if a real estate agent can develop a relationship with one that offers competitive pricing, it could be beneficial for everyone involved.
Should You Use the Real Estate Agent’s Lender?
Often times when you make an offer on a home, the agent will ask you to get pre-approved with their “preferred lender.”
While it may be in your best interest to get the pre-approval, just to show you’re very serious about buying the property (especially when there are multiple bids), you don’t need to use their lender to obtain your financing.
If anything, you can chalk it up to another mortgage quote, along with the others you hopefully obtain while shopping around.
Just blindly going with the referred bank or lender clearly isn’t wise, because when it comes down to it, you really won’t know how competitive they are unless you shop your loan elsewhere.
Yes, it requires more work, and yes, the real estate agent will probably tell you their mortgage broker or lender is the best in the business, with the lowest possible rates.
They may even go as far as to use scare tactics to get you to use their guy or gal.
But you may regret using them after the fact, especially if they weren’t even able to fulfill expectations on the customer service front.
In other words, get pricing from their preferred lender and see how it stacks up with your other offers, then go from there.
That way you can appease the agents involved and make sure you’re doing your due diligence.
Read more: How to get a better deal on your mortgage rate.