While this is a shady business tactic.... it isn't illegal YET!!!
I received an email saying this was being voted on May 2007. You need to be heard so please contact Texas Legislature. The bill states it takes effect Sept 2007.....so hurry. If you do not know who to write or how to contact your legislators, then follow this weblink to find out how to contact them by email: http://www.capitol.state.tx.us/resources/FAQ.aspx#2
The background on this is that builders have gone from offering a small incentive to go to their mortgage company to now withholding up to $25,000 in upgrades if a buyer doesn't go to their mortgage company. As a result, an unsuspecting buyer signs a contract with that incentive/penalty, after being assured that the builder's mortgage company will offer a market rate and costs, only to find out prior to closing that the rate is considerably higher than the market but they can't get out of the contract at that point - - and are stuck choosing between losing thousands of dollars on the mortgage or losing thousands of dollars of their own purchase money that was supposed to go toward the house. This bill can stop that practice if you and your friends will write your legislators.
House Bill #3798 A BILL TO BE ENTITLED AN ACT Relating to certain sellers of homes offering a benefit contingent on the use of a specific mortgage lender. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Subchapter D, Chapter 35, Business & Commerce Code, is amended by adding Section 35.65 to read as follows: Sec. 35.65. SELLER PROHIBITED FROM MAKING BENEFIT CONTINGENT ON USE OF MORTGAGE LENDER. (a) A person who builds and sells a single-family residence may not offer or provide a benefit to a potential purchaser of the residence as consideration for the purchaser's agreement to use a mortgage lender specified by the person for a loan to purchase the residence. (b) A person who violates Subsection (a) is liable to the purchaser for: (1) any damages arising from the violation; and (2) reasonable attorney's fees and costs. (c) A purchaser may not waive the right to sue under Subsection (b). SECTION 2. This Act applies only to the sale of a single-family residence closed on or after the effective date of this Act. SECTION 3. This Act takes effect September 1, 2007.
http://www.legis.state.tx.us/tlodocs/80R/billtext/pdf/HB03798I.pdf <== copy of the text of this bill.
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Tom Burris
DallasLoanGuy.com
Yes, Roberta.
Although this is a Texas Bill..... I imagine that EVERY state will be watching.
Tom.... this is great. Too bad it isn't nationally, which can't because of each state, unless the Feds jumped in... but this would be great if every state took charge. thanks for sharing... and ditto what Roberta had mentioned.
Hey Tom,
I thought that on CB we'd determined this to be a violation of HUD rules. Not so?
- Tchaka
some have interpreted it as a violation of something.... others have not.... as i understand it.
it will be interesting to see it defined.
renee....
i have seen some WILD swings in prices builders offer.
with incentives, without, seller paids, ect.
thing is.... the $10K chandeliers and curtains can be had for $1K at home depot.
sad
renee....
i have seen some WILD swings in prices builders offer.
with incentives, without, seller paids, ect.
thing is.... the $10K chandeliers and curtains can be had for $1K at home depot.
sad
And my favorite line yet.... => a $10,000 "upgrade" is really nothing more than a bookkeeping subterfuge
http://realtytimes.com/rtcpages/20050509_buyersaskhud.htm
happens all the time down here... too much inventory
I've seen it in action by creating a scenario to be an onsite lender for a huge 700 unit high rise condo... the builder is making enough to cover their costs without any effort
when they deal with a national lender, they get 2-3% extra kicked back on each loan!
Let me tell you something about "shady business tactics that are not illegal yet"!!! Massive BTSA's to Realtor's who pretend to care about their clients. I've received many calls from Realtors asking to hold some concession money so they can turn around and add it to their commission. I'm not oppossed to BTSA's as long as they are properly disclosed; not written in the contract after the client signs all the other pages and initials in all the appropriate spots.
I thought the buyer's agent was to get the lowest price for the client. With 10k, 15k, and so on BTSA's, you don't think it's shady to not use that money to lower the price for the client? Don't act like that gets disclosed to the client either, except at the closing table. I've been in this business for 10 years now. That's how I know what really goes on. If you are TRUELY against SHADY BUSINESS TACTICS, then you wouldn't mind a new addendum that requires the buyer to sign off that he/she understands that the Realtor is receiving a disclosed amount of money for their business at the new home sales center. Lots of realtors ask that the BTSA not be disclosed. hmmmm???? When a huge BTSA is up for grabs, do you truly think the Realtor does get influenced to show the client a home that would better his pocket rather than better the client's need?
By the way if XYZ builder offers 7k for closing costs with a half a point higher interest rate, why don't other lenders offer the same 7k from their own funds? If the builder's lender has money to offer, then let the buyer choose who they want to use, but don't go asking for the builder's money. That money belongs to the builder. That's what business and free enterprise is all about. Come on. Lots of sales counselors would love to use lenders who have prequalified their clients and have them ready to close. the problem with that is communication. Most lenders don't like to give updates so that the sales counselor can give status reports to their supervisors. 9 times out of 10, they don't answer their phone, and when they do answer, the following answer is given to them, "i'm on the phone with the investor right now...can i call you back". Sound familiar? I've found that lenders who complain about not getting concession money from builders are usually the lenders who offer empty promises, have one client to work with for the whole month and are depending on that one client for a paycheck, have excessive fees and pretend that all those fees are necessary. That's shady.
Seems that I have struck a nerve with you Josh.
I fully understand that it goes both ways. That is why I will leave your little rant here in the comments for others to see.
However, I would rather see you post responses as to why you feel that it is in the best interest of the client for builders to tie incentives to the preferred lender. Anyone can point fingers and say that the other side sucks worse.
Thank for stopping by.