Heather Foreman

By: Lynn Ettinger

Did you hear the one about the dog who wrote a love letter? Not to his owner, but to a home seller. Well, actually the dog’s owner wrote the letter in Buddy’s voice, describing how wag-worthy the house was and how much he craved a game of fetch in the backyard. 

Doggie ghostwriting, which happened IRL, is just one example of how home buyers are using creativity to try to get their offer accepted. It sounds harmless enough. But buyer letters to home sellers can unintentionally create Fair Housing Act discrimination and risks for buyers, sellers, and their agents.

How Love Letters to Home Sellers Work

“A love letter is any communication from the buyer to the seller where the buyer is trying to set themselves apart,” says Deanne Rymarowicz, associate counsel at the National Association of REALTORS^®. “ It could be an email, a Facebook post, a photo. Some buyers send elaborate packages with videos and letters. The communication has the intent of ‘pick me, and here’s why.’” 

Buyers who write the letters typically send them to the listing agents, along with their offers, says Paul Knighton, CEO and cofounder of MORE Realty in Tigard, Ore. “They ask, ‘Would you please pass this along to the sellers?’ They’re trying to do what they can to get their offer accepted, especially in a competitive market.”

Letters Can Risk Violating Fair Housing Act

While these love letters may seem harmless enough, they can create a problem if buyers accidentally reveal information in one or more of the seven areas protected by the Fair Housing Act, Rymarowicz explains. Those areas are race, color, religion, sex, disability, familial status, or national origin. “Buyers could say something like, ‘this is down the street from our temple,’ or ‘the hallways are wide enough to accommodate my wheelchair.’ Anything that provides personal information related to one of the prohibited bases for discrimination could result in a violation if a seller makes a decision based on that information.” 

Do Love Letters to Home Sellers Work?

In addition to creating potential risk, love letters to sellers aren’t all that effective, Knighton says. A case in point: Several years ago, one of his clients got 14 offers overnight, ranging from $219,000 to $250,000. “A person who offered $225,000 wanted to send a love letter. I said to him, ‘You’re writing an offer that’s $25,000 under the highest offer. A letter’s not going to help.’ He wrote it anyway, but the seller didn’t even read it and took the higher offer. The offer needs to stand on its own.” 

Beyond ignoring the letters, some sellers may be completely turned off, Rymarowicz says. “They may think, ‘This is a financial transaction.’” 

Even the circumstances can suggest Fair House Act discrimination, she explains. Say that an offer with a love letter got the house but was less attractive than an offer without a letter. “If the losing buyer doesn’t share characteristics of the seller and the winning buyer does, you could potentially have a situation. If sellers accept love letters, it’s more important that they document the basis of their decision when selecting a winning offer.”

Tips to Avoid Violating the Fair Housing Act

Here are five tips to avoid risk of violating the Fair Housing Act:

1. Keep the contract in mind: Knighton says real estate pros at his firm talk to buyers and sellers about contract boundaries. “We say, ‘Please don’t communicate with the other party, because we are in contract negotiations and need to manage time frames.’”  
2. Focus on objective information: Find ways to differentiate yourself on objective terms. And talk to the agent about how to improve the substance of your offer, Rymarowicz advises. “Can you make a larger earnest money deposit? Can you give them a longer closing date?” 
3. Proceed with caution: The NAR discourages buyer letters to home sellers and advises caution, according to Rymarowicz. 
4. Talk to your agent: Don’t be surprised if your real estate agent brings up the subject. “If you’re the seller, the listing agent may talk to you about the potential for Fair Housing violations. They may ask if you want to accept the risks,” Rymarowicz says. If the agent doesn’t raise the subject of buyer letters, the buyer or seller can do so. 
5. Know your state law: Oregon passed a law governing how letters to home sellers are used. “Effective January 2022, a seller’s agent must reject any communication from a buyer other than customary documents,” Knighton says.

Even if a buyer letter to a seller focuses on the property and not the buyer, there’s little to be gained, Knighton says. “There’s risk, but the reward isn’t there. Instead, focus on writing a really strong offer. That’s what has to stand out.”   

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Copyright 2021 NATIONAL ASSOCIATION OF REALTORS®

By: Lynn Ettinger

Home buyers who do mortgage loan shopping can avoid leaving money on the table.

Whether you’re shopping for new bed sheets or a new car, the drill is usually the same. Hit the reviews, check with friends, and scope out the best deal. After all, who wants to buy a car that racks up repair bills right away? Yet when picking a mortgage loan, borrowers don’t always think about comparison shopping.

In a Bankrate survey of recent home buyers, 12% of millennials said they believe their mortgage rates were too high. Some buyers may think that when mortgage rates are low, they don’t need to shop for the best offer. But even a few basis points can make a difference of thousands of dollars over the life of a loan, according to Bankrate, the Consumer Financial Protection Bureau, and the Federal Trade Commission.

You may think mortgage shopping is as enjoyable as prepping for a tax audit. It’s true that comparing home mortgages can get complicated. But you don’t need a finance degree to make an informed decision. Here are some steps to get there.

Find a Few Lenders

When looking for lenders to consider, loan officers recommend going to a few sources:

• Locals you know and trust: “Make sure the lenders you’re comparing come from referrals from local people you know who’ve worked with them — like your friends or relatives,” advises Jeff Koch, vice president of residential lending at Draper & Kramer Mortgage Corp in Schaumburg, Ill. “Wherever you have trust established would be a good source.”
• Your real estate agent: “If you’re working with a real estate agent, find out if they have any feedback or advice on a lender or a loan officer,” recommends Jim DeMarco, branch manager and senior loan advisor at Flagstar Bank in Seattle.
• Online reviews: These can be a good starting point, DeMarco says. “If you see a lot of really good reviews, that means people are taking the time to provide them.”

Have an Intro Mortgage Loan Meeting

During a meet and greet, you and the loan officer will usually ask each other questions, and the loan officer will use that information to assess your qualifications. That may sound cut and dried, but the meeting should be fluid based on what you’re ready to do.

Typically, the loan officer would schedule a meeting focused on comparison shopping separately. If that sounds painful to borrowers who want to (literally) get moving, no problem, Koch says. “The borrower may be well versed and want to get right to what’s most relevant for them, which are the financial and comparison details. But a lot of people need to go over their own questions or cover key topics first.”

Want to meet virtually? “Some folks are just more comfortable virtually, and that’s OK,” DeMarco says. “I’ve closed loans with people I’ve never talked to on the phone. It’s all via text.”

Interview the Mortgage Loan Officer

Whichever way you choose, this meeting is prime time to interview the loan officer. Borrowers need to find someone who will be in there with them and who can problem solve. “We call unanticipated problems ‘icebergs,’” DeMarco says. “You think there’s smooth sailing. And then, suddenly, you smack into an iceberg.” 

Scope out the lender’s communication strategy and their process for delivering on time. “The process is highly complex, and you’d think professional lenders all would have mastered it. That’s not the case,” says Koch. “When a loan is not delivered on time, people’s finances and lives are basically balanced on the head of a pin, which is the closing date.”

To avoid problems, ask questions like these: 

Fact finding about the process:

• Would you take me through the process?
• What should I expect? 
• What will I need to supply?

Compatibility with the loan officer or mortgage banker or broker:

• What’s your communication style? Are you willing to communicate virtually?
• When would I work with you? Are you available in the evening?
• Will I be working with you or a member of your team?
• What do you think of my time frame to get to closing?
• What if any issue do you foresee being a problem?

Track record of loan officer and lender:

• How long do loans you process typically take to close?
• What are some ways you could expedite the process if there’s a tight time frame?
• About what percentage of loans you work on close on time?
• How many loans have you worked on that haven’t closed or haven’t met deadlines? 
• What’s the biggest problem you’ve had with a loan and how did you fix it?

Use the Meeting to Learn

You can also use the meeting to clarify general info you’ve picked up online and talk about your concerns. DeMarco gives an example. “You may have switched careers or industries in the last year or started having bonus or commission income. Your research may have shown that you can just divide your salary by 12 to figure monthly income. But it may not be as simple as that.”

You’ll also want to bring up concerns like the impact on your credit score. Thirty-eight percent of buyers think comparing multiple mortgage offers in a short time will hurt their credit rating, according to a 2020 LendingTree survey. “As long as the lenders all pull the borrower’s credit within a couple of weeks, it’s counted as a single credit inquiry. So, it’s not a problem if they do it within a narrow band of time,” Koch explains.

Get and Compare Financial Information

Whether you’re looking at a federal form called a loan estimate or a precursor form called the fees worksheet, you’ll see a breakout of closing costs, explains Koch. “To compare the lender financials, you’ll want to drill down to origination charges in the lender section. Make sure you’re comparing apples to apples. If one lender is offering a 30-year fixed rate at 2.875% with no lender fees and another is offering 2. 75% with $1,500 in lender fees, those are unlike products. Get the fees at the same rate to find out who’s less expensive.”

6 Tips to Get Mortgage Loan Information

Comparison shopping can get complicated. Here are six ways to simplify the process.

1. Keep Your Pool Manageable

Mortgage shopping “depends on the borrower and the personality type and how they’re wired,” Koch says. “The process can seem overwhelming. That’s why it makes sense to have a select few options to compare so borrowers can process and assimilate them.”

2. Get a Fees Worksheet

The best way to compare effectively is to zero in on the fees worksheet, which the loan officer should provide. “You’ll be able to figure out just what the lender’s direct fees are, and you can make a nice, simple comparison.”

3. Understand a Fees Worksheet Versus a Loan Estimate

Keep in mind that the numbers on the worksheet are estimates and not locked in. Interest rates are fluid and change daily or even more often, DeMarco says. On the other hand, after you have a contract with a seller, “the loan estimate and loan application are where the information is binding barring structural changes to the loan,” Koch says. Make sure the information reflects previous discussions with and disclosures by the loan officer.

4. Be Careful Interpreting Third-Party Fees

Third-party fee estimates are included on the worksheet. Two lenders could each come up with different estimates for title, escrow, or appraisal fees, Koch explains. But not all are negotiable. For instance, the seller chooses the title company, so the lender doesn’t control the choice or the fees. The lender could be choosing the high or low end of a range, but it’s only an estimate.

5. Think About Timing

Make sure lenders are using the same time frame for locking in pricing and that it will extend through the closing, Koch notes. “A lender might offer a rate that’s a lock for three weeks, but if you anticipate or know your closing date will be five or six weeks out, that’s a problem.”

6. Consider Applying for Loan Approval Before Finding a Property

“Many lenders will not do this,” Koch says. “But some will allow borrowers to go through the formal underwriting process — not just preapproval — without having a property. The borrowers can get a bona fide mortgage commitment with all of the major buyer financials truly underwritten at that point. Then when borrowers make an offer, they can close more quickly.”

You’ll have to invest some time and effort into comparison shopping for a mortgage loan and selecting a lender and a loan officer. But your return on investment can pay off over the long haul.

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© Copyright 2021 NATIONAL ASSOCIATION OF REALTORS®