Danilo: I respectfully disagree with you that recommending loan officers increasing your liability. If you have good experiences with a loan officer, then you have a shield in case something does go bad.

Loan officers: regarding FHA loans, if you don’t know how to order a case number, run CAIVRS, clear LDP and EPLS, know what MCAW means, know that you need seller and both agents to sign the amendatory clause and real estate certification, then RTM before you even touch an FHA loan. Its all in your lender’s guides.

Frankly, I didn’t know that a buyer/Realtor even should ask whether a particular lender was FHA-approved.

I do now.

As a Buyer’s Agent, I do what I can to keep buyers out of bad lender’s hands and harms way. But there is no way for me to physically make them use the lender I recommend or make them not use their cousin, brother-in-law, company-recommended lender, etc.

In fact, pushing my own lender can actually increase liability to myself and my broker should the lender drop the ball (nobody’s perfect all the time). There is a fine line you have to walk between consulting your clients and forcing them to do something which can turn them off and can open you up to serious liability.

Here’s what I tell my buyers (and it’s the truth):

“If something goes wrong with the lender I recommended, I can help and they’ll jump through hoops to make it right. If something goes wrong with yours, I can’t do anything to help you because they don’t me from Adam and have no reason to jump through hoops, let alone answer my phone calls.”

I (at the time an exclusive buyer’s agent) was working with a buyer who was referred to me through another agent. The agent referred the buyers to a lender she had used before and that had done the buyer’s parents mortgage just months before.

I interviewed the lender on the phone – not only had he been in business for ten years and was local but he had a lot of experience doing the type of loan (CHFA – a first time homebuyer program in CT with a lower fixed rate).

I felt comfortable and we proceeded. Immediately after we located a property, I sent the contract over the lender and I had a hard time reaching him. When I finally did, he told me that the buyer was going to need a small gift from the parents (news to me). The purchase price was under the pre-approval amount I had been given to work with.

So, the parents agreed to the small gift. I kept tabs on the lender and regularly called his loan processor who said everything was on track. The day mortgage committment was due, I couldn’t reach anyone so I got an extension – after multiple calls I found out that the small gift had to be $20,000 and the lender was trying to get the buyers to take out an adjustable rate mortgage if the parents could’t do the gift. We postponed the closing three days while the lender tried to figure something out but he was completely inept.

The buyers lost the house. I sent them to my lender who pre-approved them for much less, they found another house and thankfully I didn’t lose a client.

To this day, the lender has not called me back to apologize for royally screwing up – nor has he apologized to the clients.

This situation had nothing to do with dual agency.

A couple of posts down-stream, you and Dave Phillips expand on a carry-over thread from the local bubble blog about lawyers vs. real estate agents and the ethics/motivation. I think this little story begs the question: who is the buyer’s agent really working for here? The buyer? The seller? Themselves? The lender is clearly looking to maximize their own business – to the point of possibly bait-and-switch on an unsuspecting borrower. The seller and seller’s agent clearly are on the opposite side of the table – they just want to close. Who is really looking out for the borrower/buyer here? Should the buyer’s agent only be motivated by the potential loss of income by “driving around a client who didn’t qualify”?

Reading your sketch of the story, I found myself wondering if it was simply the case that the only lender who would even “work with” the buyer for a property in this price range was a questionable one – perhaps that’s the reason the buyer’s agent steered their buyer to that lender. Just speculation.

This is a big problem (as you’ve pointed out before) with the whole compensation structure – and it extends beyond just the problems of dual-agency.