Deal Story: Always Use a Local Lender
No matter how long anyone has been selling Real Estate, there is always a lesson to be learned. And one of my latest transactions was no exception. Twelve days after coming on market, my clients received five offers above the asking price for their gorgeous condo on Page Street. The highest offer was a non-contingent financed offer from one of the big institutional banks and it was likely the offer my clients were going to accept; however, it came with some big red flags.
Red Flag #1: The pre-approval letter came from a lender out of the bank’s Phoenix Central Processing Unit instead of a local lender out of San Francisco.
Red Flag #2: The pre-approval letter was explicit that the buyers were not fully underwritten by the bank, but their offer came with non-contingent financing. In other words, the bank had not yet fully underwritten the buyers.
As the seller’s agent on the listing side, an important part of my fiduciary duty is to suss out the financial qualifications of the buyers and their lender. So, after a call into the central processing center that led to a circle of unanswered rings, I reached out to the buyer’s agent for clarification.
When I finally got a hold of the lender, she was reluctant to share any information about her clients. It wasn’t until I shared with her that the process for buying real estate in San Francisco is very competitive. It’s my job to give my sellers all the information they need to choose an offer from a buyer that will be able perform per the contract. And there were four other offers on the table! She reluctantly shared the information necessary to help my sellers choose her clients. However, this is something that would have been a no-brainer for any lender based out of San Francisco who understands the local game of real estate.
But the drama didn’t end there! When you’re working with a local lender, even with a big institutional bank, they have their team of processors and underwriters who understand the nimbleness of the San Francisco market. And they tend to over-perform because they are more likely to be getting their next referral from those clients or their realtor.
Whereas the team out of the central processing center is reactive to deals from all over the country, and performance is only an issue for closing, NOT for getting the next deal. With no clear communication and mixed messages coming out of the central processing center, I had to dig into my digital rolodex and reach out to a private wealth manager at that bank, who asked the right questions internally at the bank to help my sellers get comfortable with how the deal was rolling along.
The most successful agents in San Francisco almost always encourage their buyers to work with local lenders. In fact, clients of mine lost a deal in 2017 because they insisted on working with a lender based out of Oakland instead of San Francisco. They lost because the listing agent for that deal advised her clients that it was too risky to work with an out-of-area lender. I’ve never forgotten that lesson!
While this transaction ended up closing a day early, it was only because the buyer’s agent and I teamed up against the bank and insisted on daily communication as a result of the bank’s poor communication and follow-through.
So when your agent (or I) encourages you to work with a local lender on the buy side or work with the buyer working with a local lender, now you know why!
