Don't Rely On Reputation - There Are No Silver Bullets

| | Comments (1)

On a regular basis, I get emails that ask me what I think of a particular company. When I check out public forums, I see questions about particular companies every time. "What do you think of X Realty, or Y Mortgage?"

Reputation has a certain value of course, but in my experience, these people are overvaluing reputation. These people are looking for a "silver bullet" solution to their situation that lets them pretend they don't need to do diligence upon their own behalf, and there aren't any. They want to be taken care of without doing the mental work of figuring out whether the person is really doing a good job. "This is a great company, and great company would never take advantage of me, so I must be getting a great bargain!"

This utterly leaves aside any number of issues. Suppose the Mortgage or Real Estate Firm of Dewey, Cheatham, and Howe were paying me a fee for every referral. Most people might have justifiable concerns about whether my recommendation was motivated by that fee or by the desire to get them a great loan. Well if you're chumming for a recommendation, you have no idea if the anonymous person recommending the firm of Dewey, Cheatham, and Howe is a virtuous benefactor - or one of their employees. The bigger the firm, the more employees they have. Huge National Megacorporation can have hundreds of their loan officers or agents log on to the internet forums anonymously and all endorse National Megacorporation's loan programs for some mysterious reason. Suppose the person isn't affiliated with Dewey, Cheatham, and Howe, but does work for a similar firm. They could be trying to build demand for the same sort of operation that feeds them, so when people read about Dewey, Cheatham, and Howe's methods being recommended, and then encounter this similar firm, they are ready to do business.

Suppose the person answering is a complete babe in the woods? They just plain have no idea. They've never gotten a loan, or if they have, they got took just as badly as anyone else in the history of the world, and worse than most. Does the possibility of such a anonymous recommendation for the Mortgage firm of Dewey, Cheatham, and Howe seem like a thing you want to follow? Unless you audit that person's transaction and compare it to other similar transactions going on at the same time, you have no real idea whether this person would recognize a scam if it bit them. Even if you do audit their transaction, that doesn't necessarily mean anything, good or bad, for your situation.

Suppose the reason this person thought Dewey, Cheatham, and Howe did a good job was because they didn't pay attention. They've read every single one of my articles, and they understand all of the things that could go wrong, and they actually know how to read a HUD 1 form, but they just didn't bother because their Uncle Joe works for Dewey, Cheatham, and Howe, and they trust Uncle Joe completely, and Uncle Joe would never take advantage of them. This ignores the issue that their Uncle Joe is unlikely to be your loan officer, and even if he was, Uncle Joe may have compunctions about his family that do not apply to you. Furthermore, a very large fraction of the most unethical stuff I've seen since I've been in this business was Uncle Joe (or Brother Moe, or Sister Sue, or Cousin Lu) raking people over the coals who they knew would not shop around for a better deal. But even if they are completely unrelated, they decided to trust Joe, and didn't do the diligence that would have told them whether Joe was doing a good job, let alone the best possible job.

Most importantly, in both the loan and in the real estate business, service is provided by individuals, not companies. It's the guy you're sitting down talking to right here that decides how much of a margin they are going to work on, not some mysterious exalted Chief Operating Officer in New York City. That COO may lay out base requirements that say "no more than X, no less than Y" ("no less than" is a lot more common than "no more than"), but it's the person doing your loan, or the agent doing your transaction, that decides where in that spectrum you fall. And I shouldn't have to point out that if they say "The corporate president says we have to make at least two points on every loan!" and somebody else offers you a better loan for you, that's their problem, not yours. They are not getting, or at least they should not get your business if you know of a better possibility. You don't owe anyone your business.

Finally, every situation is unique. People ask me what I think of a particular lender, and I'm thinking about the clients they'll do well with, or the clients where that particular lender's programs are most competitive. The lender with the best thirty year fixed rate mortgage in the business is not a lender I would use for an 80/20 short term piggyback on someone with a 600 credit score. That particular lender never wanted to touch 100 percent financing, and refuses to do business at all with anyone whose credit score is less than 620. The lender I'd most likely use for the latter borrower has a rate and cost tradeoff for their loans that knocks them completely out of contention for the A paper full documentation 80 percent LTV thirty year fixed rate loan with no prepayment penalty. They're not competitive for that borrower, and both that account executive and I know it. They'd be grateful to me for placing the loan with them, and they'd certainly get it done, but my wholesalers and I have an understanding: The lender who has a program that can actually fund the loan with the lowest rate cost tradeoff on the best terms for the client gets the business. There are any number of constraints and possible aspects to a client situation that can cause me to turn away from one lender and to another lender, based upon how that particular lender treats that particular situation.

Lenders don't want to compete on price, but a good loan officer forces them to do precisely that. And if the wholesaler is one of those who refuses to compete on the basis I want them to compete on, there are plenty who will. Don't BS me about service. Everybody should have great service. If you don't have great service, we're not meant for each other, and the lenders I already do business with all have great service. What I want is a great loan for this client that you can actually deliver on time. If you've got that, we may have some business. If you haven't got that, we don't. This point, incidentally, is one of the reasons you'll end up with a better loan from a good brokerage or correspondent than you will from the best lender. A broker or correspondent loan officer knows how to shop loans better than any ordinary consumer. This is one reason why bankers are trying so hard to drive them out of business.

(Note: At this update, there are no generally available 100% financing programs. Every such 100% financing program that's currently available has significant restrictions, based upon factors like whether you're a veteran, where you want to live, whether you're a first time buyer, whether there is money in the budget, etcetera. I'm confident that 100% financing programs for the general public will come back, but they're not here right now)

This isn't to say you should just trust a broker. Indeed, my point is that you shouldn't trust anyone. Shop around, compare what's available, ask them what for written guarantees (insofar as they are available in a different and changed lending environment), verify everything, and don't give them your dollars to hold hostage until they've actually delivered. That's why I put out the yardsticks for measuring performance I do, that's why I give you the strategies for finding the people who will do a better job, and for forcing them to actually do a better job. You can't know if something is a good bargain except by comparison with something else like it, or several somethings. Given the amount of legal wiggle room there is, unless you pin a loan officer or real estate agent down with specific guarantees and conditions in writing, what they actually deliver is completely dependent upon their good will. If they have good will, you don't need to work nearly so hard, although comparison shopping would still be a really good idea. But if a decent proportion of agents and loan officers had goodwill, there would be a lot fewer problems with the industry.

Caveat Emptor

Original here

Categories

Delicious Bookmark this on Delicious StumbleUpon Toolbar Stumble It!

1 Comments

Jill N. said:

I think we all have an Uncle Joe that actually did work for a lender. Regardless, you are right, loans come from people who are individually motivated. Our most recent woes are simply a result of too many "highly motivated" loan officers who did their job to the detriment of their clients.

Please be civil. Avoid profanity - I will delete the vast majority of it, usually by deleting the entire comment. To avoid comment spam, a comments account is required. They are freely available, and you can post comments immediately. Alternatively, you may use your Type Key registration, or sign up for one (They work at most Movable Type sites) All comments made are licensed to the site, but the fact that a comment has been allowed to remain should not be taken as an endorsement from me or the site. There is no point in attempting to foster discussion if only my own viewpoint is to be permitted. If you believe you see something damaging to you or some third party, I will most likely delete it upon request.
Logical failures (straw man, ad hominem, red herring, etcetera) will be pointed out - and I hope you'll point out any such errors I make as well. If there's something you don't understand, ask.
Nonetheless, the idea of comments should be constructive. Aim them at the issue, not the individual. Consider it a challenge to make your criticism constructive. Try to be respectful. Those who make a habit of trollish behavior will be banned.

Leave a comment

Copyright 2005-2014 Dan Melson All Rights Reserved

Search my sites or the web!
 
Web www.searchlightcrusade.net
www.danmelson.com


Buy My Science Fiction Novels!
Dan Melson Author Page

The Man From Empire
Man From Empire Cover

A Guardian From Earth
Guardian From Earth Cover

Empire and Earth
Empire and Earth Cover

Working The Trenches
Working The Trenches Cover

--Blogads--

blog advertising
--Blogads--

blog advertising --Blogads--
**********


C'mon! I need to pay for this website! If you want to buy or sell Real Estate in San Diego County, or get a loan anywhere in California, contact me! I cover San Diego County in person and all of California via internet, phone, fax, and overnight mail. If you want a loan or need a real estate agent
Professional Contact Information

Questions regarding this website:
Contact me!
dm (at) searchlight crusade (dot) net

(Eliminate the spaces and change parentheticals to the symbols, of course)

Essay Requests

Yes, I do topic requests and questions!

If you don't see an answer to your question, please consider asking me via email. I'll bet money you're not the only one who wants to know!

Requests for reprint rights, same email: dm (at) searchlight crusade (dot) net!
-----------------
Learn something that will save you money?
Want to motivate me to write more articles?
Just want to say "Thank You"?

Aggregators

Add this site to Technorati Favorites
Blogroll Me!
Subscribe with Bloglines



Powered by FeedBlitz


Most Recent Posts
Subscribe to Searchlight Crusade
http://www.wikio.com

About this Entry

This page contains a single entry by Dan Melson published on December 28, 2013 10:00 AM.

Cash Back From The Seller to the Buyer in Real Estate Sales was the previous entry in this blog.

Wanting a More Expensive Property Than You Can Really Afford is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

-----------------
Advertisement
-----------------

My Links