For Sale By Owner - Working Directly With a Loan Officer

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Just got a search on "state of california fsbo questions to work directly with loan officers without a agent"

This isn't a problem. Whereas it is the same license, it is two entirely separate job functions and the government is in the process of instituting a separate license requirement for loan officers. I am one of the maybe 20% of licensees who does both, and I have no problems separating the job functions. The fact that you are or are not working with an agent has absolutely nothing to do with whether you can get a loan. In fact, if you're the seller, it's really no business of yours who the buyer gets a loan with, or where, or even whether they get a loan or pay cash. So long as you get your money, it's all the same. In fact, it is illegal under federal law for the seller or anyone else to require that the buyer obtain their loan through any particular provider. So just know that it's not a factor and keep your nose out of the buyer's business.

This also is not to say that some folks who do both might not attempt to trick or pressure you into signing an agency agreement. The way to deal with that is to contact your state Department of Real Estate (here's California's). In California, they do investigate all complaints thoroughly, even if the complainer later changes their mind.

This is not to say you should be looking for real estate agent responsibilities from someone acting solely as your loan officer. This happens quite a bit; If they're not getting an agent's commission, you should not ask them to do an agent's work or assume an agent's responsibility. Asking you to sign a form that says they are acting purely as a loan officer and are not responsible for anything except the loan is reasonable. Loan officer legal responsibility is minimal to non-existent anyway; it's one of the reasons the loan business is so messed up and out of control. But asking a loan officer to do both jobs for the pay of the lesser is unacceptable. You don't do extra work for free, you don't assume extra responsibility for free. Why should you expect someone else to do so?

In California, we changed the law a couple of years ago so that in certain circumstances where the firm is licensed with the Department of Corporations, the loan officers do not have to be individually licensed. I've seen a lot of abuses out of such situations; the loan officer who isn't individually licensed isn't risking their individual ability to work in the profession, no matter how egregious the violation. Indeed, many firms licensed with the Department of Corporations instead of the Department of Real Estate have made a point of recruiting people new to the profession who don't know any better, and no one will tell them until they go work for a company with better practices, which most of them never do. These folks also don't know how much the company makes per loan, so they don't have to pay them as much. Best of all possible worlds from the company's view!

I am not saying that doing without an agent is intelligent. In fact, unless you're a practicing agent yourself, it's one of the dumber ways to shoot yourself in the foot. It's just that there's no legal requirement to have an agent.

But so long as you only ask a loan officer to do the loan officer's job, there should be no problem with doing a loan on a For Sale By Owner property. After all, you don't need a real estate agent to refinance, do you?

Caveat Emptor

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About this Entry

This page contains a single entry by Dan Melson published on October 10, 2014 7:00 AM.

Pre-Payment Penalties and Second Trust Deeds was the previous entry in this blog.

Demands Listing Agents Make That Aren't in Their Clients Best Interest is the next entry in this blog.

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