Getting Away With It
August 4, 2011They are everywhere – new home communities with builders
offering great incentives – below market interest rates, purchase discounts,
$20,000 worth of upgrades, $5,000 towards closing costs, etc., etc., etc.
However, these incentives usually include a fine-print
requirement to utilize the builder’s preferred mortgage lender and Settlement
Company. A “one-stop shop” may sound ideal to a buyer, but it may not provide
the most cost-effective method for purchasing a home.
These builders may also be breaking the law. The Real Estate
Settlement Procedures Act (RESPA), a consumer protection statute first passed
in 1974, was designed to protect consumers from kickbacks and referral fees
when shopping for mortgages and settlement services.
So, builders who require a buyer to use their preferred
service providers to obtain specific benefits seem to be violating RESPA. So
how are they getting away with it? No one really knows.
In my opinion, buyers considering home communities with
qualified incentives should first find their own real estate agent with strong
negotiation skills. The agent may be able to fight for you to receive the same
benefits while choosing your own mortgage lender and Settlement Company.
Additionally, avoid visiting these new home communities and
signing in with the agent on duty. The sign-in form often contains legal
verbiage requiring you to use that agent for buyer representation as well.
Although dual agency, a single agent representing both the buyer and seller,
can be legal, it’s like going into a courtroom with the same attorney for the
prosecution and defense.
Forewarned is forearmed. With the knowledge above, you can
outmaneuver builders attempting unfair purchase practices and even borderline
RESPA violations.
Have more questions?
Call me!
Guaranteed Home Mortgage is a Direct Lender licensed by the PA Dept. of Banking
Dan Ranck
Guaranteed Home Mortgage Company, Inc.
5513 Main Street
East Petersburg, PA 17520
Telephone 717-271-2400
Toll-Free 1-888-566-1795
Fax 1-888-275-8495
NMLS # 140989
