Additional Pre-Approval Required – The New Mortgage Scam?

My husband and I have been house hunting for about 6 months now. We’ve taken all the proper steps – securing pre-approval from a mortgage lender who was recommended by his boss, gathering all of our documents, saving for down payment and closing costs, budgeted and made determinations for things that we want vs. things that we “need” in a house.

Given our limited budget – having to keep our purchase price under $140,000 (my income as a consultant can’t count toward our approval price) – we began looking at the foreclosure market – a very large market in Florida. Perhaps we could find something comfy with enough room for us to not trip over one another. Sadly, the first several months yielded no livable results – and really opened our eyes to the sad state of the market in Florida. Time after time I walked into a long-foreclosed home to find a room carefully and lovingly decorated for a small child – often with growth charts painted on the walls – the sign of a family once planning on planting deep roots in a home they loved, and having that home torn from under them because of the economic crash.

There are signs of anger and resentment in nearly every home – damage is everywhere. Appliances and cabinets ripped away, holes kicked or punched in walls, deliberate damage that screams of the owner’s last frustrated attempt at “justice”: You may own this house, but my family made it a home, and if we’re leaving, we’re taking as much as we can with us.

Finally, my husband and I found a house we could call home: a foreclosed house that had been previously owned by two brothers who were hoping to flip the house for profit. No displaced young children, no shattered family dreams, no desperately sad, depressed karma in a home from its history – just a real estate gamble gone bad. Thrilled to have found such a bright, airy home in a such a friendly family neighborhood, we were eager to put in a bid on the house – and learned something new about the market that I’m convinced is the new real estate scam: additionally required pre-approvals. Looking back through all of the other MLS listings for other properties, we all found the same thing: “Seller requires pre-approval through XYZ Bank. Please call So-And-So at 561-111-2222.”

Upon calling the listed number – assuming no problems would come up – the broker on the line assured us that, not only would the “trusted lender” not be able to give us the same rate as she could, but that she could guarantee that we’d get the property, because she has a “partnership” with the bank that owns it, and if we “went with her” we’d be able to close within 30 – 45 days.

My husband showed hesitation. Not only had we spent 5 – 6 months to this point working with Alex, our lender, calling him at all hours of the day and evening with questions and for information, but my husband’s boss had referred him to us, and we knew nothing about this woman, nor her company.

When he said that he didn’t think we’d be going with her for anything more than pre-approval, this lender sent an email to our realtor letting them know that she couldn’t pre-approve us for $125,000, $15,000 less than our lender had pre-approved us for, and tried to press our realtor to send her business. Meanwhile, though she was responding to their calls and emails, she refused to return my husband’s and my calls or emails, for over a week, only calling us out of the blue after my realtor emailed her to say that were were no longer interested in the property because of how she does business and how long her process was taking.

That random call was around 9 pm, and with a total change in tone – she absolutely could pre-approve us, she said, and she had confused us with another applicant. Not only could she pre-approve us, she could guarantee us the inside track, offering us information (which our realtor advised us she could not legally disclose) about what other bidders had offered on the property – claiming numbers up to $40,000 MORE than the asking price and advising us to up our offer. She also let us know that everyone else who had been interested in the property had since moved on, and that we’d have a clear shot at the home if we worked with her. After nearly an hour on the phone, placating her for the sake of getting our required pre-approval letter (but making no commitments), she ran my husband’s information, let us know we’d be pre-approved for up to $140,000, and promised to send our pre-approval letter to our realtor that night. This was on a Wednesday. Friday, we met with the realtors to sign our offer on the property and go over the contract, and the realtor mentioned that he still needed the pre-approval letter from this woman. My husband called right away, and was told she’d send it by the following morning.

Unfortunately, early the next morning (Saturday), we received a call from the lender grilling us about whether we’d be using her or not, and telling us that “she wasn’t going to waste another minute on us if we weren’t going to do business with her.” After arguing with her about her prior pre-approval, she finally sent the letter and told us not to bother her again.

I’m curious to hear from anyone out there who’s seen a similar scam. Our realtor has advised us that banks that are taking a loss on their properties are trying to recoup those losses through mortgage interest, or that perhaps certain listing agents have deals with lenders to ensure that someone trust-worthy has pre-approved a potential buyer before changing its status from “Available” to “Contingency.” To me – this seems like a scam that punishes first-time homeowners. When dealing with these properties, we’ll realistically have to put bids on at least two homes (the nice ones have multiple offers, and as first-time buyers, we’re apparently at the “bottom rung” of the offer ladder), and likely more, before we can get a home. Each time that credit gets pulled, it drops my husband’s credit score by at least 2 – 3 points. So, in order to buy a home, his credit may drop 10 – 15 points before he can even go through the official approval process/mortgage commitment, meaning that our rates will be higher and approval amount lower.

Has anyone out there had experience with this type of process?