Builder and mortgage lender relationship ! (Plano, Irving: loan, houses, buying)

[planoin]

Hi,

When I was talking to the builder in Frisco last week and I was told that if I use the lender (builder authorized lender) for a single family home purchase loan then the price of the house will be reduced by $50K.

Now my question is what is the relationship between the builder and the lender ? Why the builder is reducing $ 50K? Does the builder make money out of it ? OR the lender make money out of me by increate int. rate etc and pass it to the builder ?

Can someone please help

Thanks,

[loves2read]

maybe the builder does get finder's fee from the mortgage company but don't think it is anywhere near the amount he would reduce the house
remember that builders aggressively price houses to make their profit as large as they can get and while some tract builders might have been willing to sell completed spec homes and take a loss I doubt they are doing that now

maybe the house is already priced 50K more than it needs to be so the builder can give away that money w/o much of a problem--

and yes--I too would be thinking there was some type of kickback involved
don't know legally how that stands

maybe one of the realtors who post here will comment

[txgolfer130]

Originally Posted by loves2read

maybe the house is already priced 50K more than it needs to be so the builder can give away that money w/o much of a problem--

BINGO!

Originally Posted by loves2read

and yes--I too would be thinking there was some type of kickback involved...don't know legally how that stands

You can bet there is a some sort of "rebate" or "discount" (kickback), but it's legal at least according to the Texas Dept of Savings and Mortgage. At least it was when I got out of the business for good in 2006.

[Rakin]

You must be dealing with a shady builder and I would find another house. Many builders own or have relationships with lenders but $50k is outrageous. Usually the Builders lender will pay the title policy as an enticement for you to use them but that is only a few thousand.

I'd speculate you're getting involved with someone you may regret down the road.

Move on.

[nsumner]

50K is definitely wayyy above what any builder offers to entice the use of their in-house builders. When you sign the contract, they will disclose to that they have a business affiliation with the builder and the title company and that they "may" benefit from what they get paid. Of course they will.

I don't know of any builder in Frisco that is offering that much. I would say may be 4k-6K incentive is expected but anything above that is very questionable.

Naima

[MovingAloha]

Originally Posted by Rakin

You must be dealing with a shady builder and I would find another house. Many builders own or have relationships with lenders but $50k is outrageous. Usually the Builders lender will pay the title policy as an enticement for you to use them but that is only a few thousand.

I'd speculate you're getting involved with someone you may regret down the road.

Move on.

I've seen this before and its legal and generally not shady. In Hawaii there is one Development that, if you use the lender associated with the development, you get: All points paid by builder; No closing Cost paid by buyer; No Points and an additional $15,000 to use to pay down interest rate, or pay off a bill to bring debt/income more in line. This Development is very successful. There are other developments on island that do similare incentives and I do recall something similar in Maryland when we bought our home there as well.

[Rakin]

Originally Posted by MovingAloha

I've seen this before and its legal and generally not shady. In Hawaii there is one Development that, if you use the lender associated with the development, you get: .

Problem is we are not in HI and this is highly and very unusual for North TX. If a builder offers this type and high of an incentive just to use a particular lender then they don't have their homes priced correctly to start with.

What you say is paid for in HI by the Builder / Lender is actually and realistically paid for by the Buyer. Nothing is free and when it boils down to real life, the customer is footing the bill. In todays world someone buying this home should be suspicious of doing business with anyone who offers this incentive.

Also, I would be very concerned about the loan appraisal when I purchased, if I paid a true fair cost for a house and what its value would be if I wanted to sell it in 2-5 years.

Just a great big old red flag.

[fzabaly]

Just from my experience looking in Plano/Frisco/Irving the last 6 months or so, the standard cost reduction is $5K in closing costs when using the builder's preferred lender. So $50K reduction in house price is likely due to builder reducing the price of 'upgrades'; I was negotiating with a Plano builder on a small 1-story house whose 'listed sale' price would have been approx $320K since that was the builder's way of valuing the house: $270K base price + $50K in upgrades. But my price when using preferred lender would have been $275K. So what you might be encountering is a similar setup: use our lender and we will 'give you' up to $50K in upgrades. In this market where new builds are not in high demand that seems possible. Best Regards, Frank Z.

[skids929]

Just remember this..There is no free lunch in the world. If it sounds too good to be true, it usually is. If you have to post here to get validation, just make sure you heed every word of all the very smart and experienced people here who have offered advice.

That builder isn't going to lose any money trust me. Somewhere he/she will make up the difference within that sale.

[momof2dfw]

Originally Posted by Rakin

You must be dealing with a shady builder and I would find another house. Many builders own or have relationships with lenders but $50k is outrageous. Usually the Builders lender will pay the title policy as an enticement for you to use them but that is only a few thousand.

I'd speculate you're getting involved with someone you may regret down the road.

Move on.

Agree.
$50K is WAY TOO MUCH for the builder to be knocking off the price to use their "in house" lender. For this size of a price reduction the lender is their own and not just one they have some small connection to. I'd be VERY cautious if you persue this relationship any further.

Originally Posted by nsumner

50K is definitely wayyy above what any builder offers to entice the use of their in-house builders. When you sign the contract, they will disclose to that they have a business affiliation with the builder and the title company and that they "may" benefit from what they get paid. Of course they will.

I don't know of any builder in Frisco that is offering that much. I would say may be 4k-6K incentive is expected but anything above that is very questionable.

Naima

It's usually in some kind of upgrade incentives they do when you use their in house lender and a few other little "perks" that are over priced to start with. To come down $50K on the price of a house for using their in house lender........ RUN! That means that the entire development was over priced and you are going to have some very large discrepencies in market values when it comes to what the county appraises the properties for in that development, what they are relisting for and in market appreciation.

This is not a good sign at all.