Conflicts of Interest: Preferred Providers

Remember you were told that this financial crisis is about all the bad borrowers who just lied about their income, got homes they could never afford, refinanced to the hilt and lived it up until everything came crashing down? Nice fairy tale to avoid responsibility. Blaming others is not new, but it also doesn’t solve problems. And this problem didn’t go away. Now, while there is plenty of blame to go around, and there certainly was a high number of borrowers who borrowed beyond their means, they could not approve and fund their own loans. Nor could they force the ratings agencies to give their risky mortgages Triple A ratings so that they could be sold around the world, tanking everyone else’s economy.

What is coming to light now is the help that so many borrowers got from people in the real estate industry. It’s all about money, and there are different ways to make that money. The less scrupulous go after kickbacks for easy referrals, or they simply fabricate information to get a deal through (and collect the commission). These are the ones who forget that working for the benefit of their client will also lead to a closed transaction that has a lot higher chances of lasting, turning into a new transaction for them a few years down, as well as a source for highly endorsed referrals from satisfied clients. The sales come in a whole lot more easily this way, rather than finding new people to bilk.

If you are looking to buy a home, here are a few things to watch out for if you don’t know your realtor:

  1. Preferred Providers. If you realtor insists on his company’s in-house services for lending, escrow, etc., ask him/her for a choice so that you can interview them and determine for yourself who is best for you.
  2. If you are given only one choice of company for your home inspection, pest inspection or other services, ask for more.

These types of services work for you, not the realtor or his brokerage that may have a financial interest in them. The realtor works for you too. Many times the brokerage’s financial interest in a service company may be because of its superior service. But it can also be another way of just trying to get more of your money in its pockets. Your realtor is obligated to disclose to you that financial interest, and it is up to you to do your own due diligence to make sure you are working with the best companies on your behalf.

Unfortunately this is a buyer beware type of situation, because there is no Consumers Report list on all these companies. But for the huge amount of money you are about to put out on your home, a little homework in your own best interest is worth it. The good news is most companies are in business to do a good job and get repeat business. We all just need to watch out for those looking to make a quick buck without earning it. Read on about the latest indictments by the FBI and HUD right here in California. Click here

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