Something I have been seeing more and more lately is sellers requiring the buyer to prequalify with their preferred lender as a condition to the offer, especially with REO (Bank Owned Properties) properties. The buyer is not required to use the lender but the seller wants the pre-qual letter to come from his lender.

This has caused some of my buyers to back out of a few deals because they thought the notion was ridiculous and a bit shady. No matter what you say to your buyers they will have heartache with this practice unless you can effectively convince them that this is not unusual and it is quite common when making an offer on an REO property.

The seller is trying to ensure that once an offer is made that it won't fall apart because of financing issues. We all know agents out there who will allow their clients to back out of deals with fictitious "no longer qualifies" letters because they found another property or the warm and fuzzies are over and they don't want to move forward anymore. These agents actually think they are doing a great service to their clients by allowing them to beat the system this way. This practice ruins the integrity of every transaction and is the reason why so many deals fall apart. Hence you wind up with sellers who want buyers to prequalify with their preferred lender.

There is really no harm in prequalifing your buyers with the sellers' preferred lender as long as a new credit report is not pulled. What I usually do is have the buyer take his prequal letter to the preferred lender along with any other documents they may request. Make it clear to your buyers not to allow the preferred lender to pull new credit. I also give the preferred lender a call to ensure this.

I hope I cleared some things up. I would hope that some lenders chime in to give their two cents.