Mortgage and Real Estate Red Flags
This is going to be one of those occasional posts that gets expanded and reposted from time to time. This list is not exhaustive, although over time it is intended to become closer. If you have one, send it to me (danmelson at this domain name)
Any of these is sufficient reason, all by itself, not to do business with that company or person, to cancel your loan if in progress, or to go get another backup loan.
Any actual lie
Up front application fees, or sign up fees.
Up front lock fees.
Up front appraisal fees, as opposed to at the point of appraisal.
Any up front fee beyond credit report.
Requiring the originals of your documents.
Trying to sell you a Negative amortization loan, under any of its names, without explaining in detail all of the gotchas
Not locking your rate, or letting it float
On stated income or NINA loans, not giving a real idea of what the payment is going to be, and making sure you can afford it.
On full documentation or EZ documentation loans, needing to document more money than you make.
Requiring you to pay an "in house" appraiser (Who is receiving a salary)
Not allowing you to choose an appraiser if you want to.
Not allowing you to order the appraisal.
Consistently using the same phrase in response to a question. "Nothing out of your pocket" ($30,000 added to your mortgage) and "Thirty Year Loan" (note the absence of the words "fixed rate") are two that are sufficiently pervasive as to merit independent mention.
An answer to a question that is somehow similar, instead of to the question you asked. Especially if said obviously intended to distract and mollify you, or is a pat phrase you've heard them use before.
You check their calculations on a couple of calculators and the numbers are both consistent and different from what you were quoted as a payment. (Some web calculators lie, but they usually lie in slightly different ways, although note that an auto payment calculator uses different first payment assumptions).
Use of non-standard forms when standard forms are available
Asking you to sign an Exclusive Buyer's Agent Agreement before they've shown you anything.
Asking you to sign an Exclusive Buyer's Agent Agreement at all without furnishing you something special (i.e. daily foreclosures lists, or some service you would otherwise have to pay for).
Not finding out what your budget range is and sticking with it. For example, if you've got $30,000 for a down payment and closing costs, can qualify for a $270,000 loan, they shouldn't show you anything that you cannot get for $300,000 total, including all costs you need to pay.
Not finding out what you actually make, and what your current monthly obligations add up to. This lets me, as the real estate agent, know what I'm really dealing with here, even though I have no real need to know if I'm not doing the loan. In case you haven't gotten the idea, there are a lot of mortgage folks out there who may not have your best interest at heart, and "stated income" loans allow for a lot of sins. You can get offended at invasion of privacy if you want, but I'd be grateful - This is one part of the system checking another, looking out for you, when they could just grab their commission and bow out of the picture.
Promising to find houses below market value. I do my best, but so does every other agent out there. This is something nobody can guarantee, and they're usually gone before the public even has a chance.
Telling you about "money in your pocket" when you ask about closing costs
Use of non-standard forms where standard forms are available.
Excessive pressure to sign listing agreement immediately (Some pressure is normal and to be expected)
Not being upfront about their business model. I've got an article about business models in the real estate industry (there are 2 basic, and many variations). Each has situations they are best for, and situations they are not so great for. You want to know if it fits your situation.
Not running advertisements for your property. This helps them generate clients as much as it helps you sell your house.
Not holding at least one open house per month on a weekend date. Sometimes this is tough during the holiday season, but there's no excuse for the rest of the year. Especially during the summer, if they want to take a three week vacation, there should be someone else there to take up the slack. Perhaps it might be unproductive if you live in a thinly inhabited area, but anywhere within the commuting area of a major city, this is a minimum.
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