New Home Builder/preferred Lender

[J Grant]

I have to question why a new home developer is allowed to have a "preferred lender"?? WTF??? Go into any builder sales office for an appraisal/read the contract and usually the builder offers a big lollipop to buyer for using their preferred lender...such as 10k paid in closing costs or a free upgrade package etc.

Of course a buyer can choose another lender, but that's a strong incentive to use builder affiliated lender. Does anybody believe an appraiser doing new home appraisals for builder preferred lender would dare come in below SC price on an appraisal? That appraiser would not be used again (at least for that project ). I doubt a builder would keep a "preferred lender" around who would come in below SC price on an appraisal.

 

[glenn walker]

Agree the preferred lenders appraisers are going to hit the numbers more often but on the other hand we had some very large projects out here in the past where it made sense because the lenders appraisers were familiar with all the floor plans-building specs-and lot sizes and location differences. These appraisers are way better than an-unfamiliar appraiser showing up not really knowing what-he/she was doing.

Also on a large development the preferred lender often designates one or two processors and underwriters just to work those files and they are familiar with the title issues and have direct contact to a designated title officers so it's a much faster and smoother transaction and in the the end the buyers are really better off using the preferred lender.

 

[J Grant]

https://www.trulia.com/voices/Home_Buying/Should_we_only_go_with_preferred_lenders_of_a_new_-357981

A little dated but good information and commentary. I was unaware the "preferred lender" would also do the construction loan to the builder....interesting.

 

[KONA]

Not uncommon for a large construction lender to offer take out financing.

 

[TJSum]

A lot of buyers will refi away from the preferred lender as soon as the contract allows, that way they get the best of both worlds.

 

[Basically Rectangular]

Couldn't/shouldn't you adjust for financing if it warrants it? Comparables that used the preferred lender could have sold for more than they would have if not using a lender incentive, similar to seller concessions.

 

[TJSum]

Not really, usually it doesn't affect the sale price directly, the builder figures they will get it back during the life of the loan with the higher interest rate that usually goes along with these incentives. Typically the preferred lender is the builders loan company. That is why the buyers refi out of them as soon as the contract allows, because of the interest rates differences.

 

[Basically Rectangular]

Not really, usually it doesn't affect the sale price directly, the builder figures they will get it back during the life of the loan with the higher interest rate that usually goes along with these incentives. Typically the preferred lender is the builders loan company. That is why the buyers refi out of them as soon as the contract allows, because of the interest rates differences.

That makes sense.

 

[TRESinc]

I have to question why a new home developer is allowed to have a "preferred lender"?? WTF??? Go into any builder sales office for an appraisal/read the contract and usually the builder offers a big lollipop to buyer for using their preferred lender...such as 10k paid in closing costs or a free upgrade package etc.

Of course a buyer can choose another lender, but that's a strong incentive to use builder affiliated lender. Does anybody believe an appraiser doing new home appraisals for builder preferred lender would dare come in below SC price on an appraisal? That appraiser would not be used again (at least for that project ). I doubt a builder would keep a "preferred lender" around who would come in below SC price on an appraisal.

completely untrue. i've done it numerous times and still have the same clients.matter of fact my 20+ year client has been a preferred lender for at least 3 builders in 7 developments in my coverage area and i know for a fact i have come in below contract price on at least one sale in each development, and most likely more than 1 per.

Couldn't/shouldn't you adjust for financing if it warrants it? Comparables that used the preferred lender could have sold for more than they would have if not using a lender incentive, similar to seller concessions.

most of the incentives they give for using one lender are already built into the cost of the house in some fashion. there was one builder who was giving away a $10,000 "bonus" if you chose their preferred lender and got an enclosed patio on the back of the house. 2 of the patio walls were the exterior of the house and the other 2 walls were made of large glass panels. the contract said it was a $20,000 option, which is complete BS (the patio was included with every sale and there is no way it cost $10,000 per glass wall for an 8x10 patio). they upcharged the enclosed patio to offset the preferred lender discount.

it's sort of like when a car maker makes an option from last year's model a standard item this year by including it with all models and raising the base price the same amount.

 

[J Grant]

completely untrue. i've done it numerous times and still have the same clients.matter of fact my 20+ year client has been a preferred lender for at least 3 builders in 7 developments in my coverage area and i know for a fact i have come in below contract price on at least one sale in each development, and most likely more than 1 per.
.

Are you saying that in 20 years, you've come in under SC price for at least one sale in each of the 7 developments? Aprox 7 below SC prices in 20 years? Not clear whether you meant to convey that or something else.