Most builders do that. I don't find it disturbing at all. No one forces a buyer to use them. It's an incentive and sometimes it's worth it and sometimes it's not. But as the lender pays for those costs,... there's nothing stopping other lenders from doing so if they wish to.

Aaron Mtuanwi - I think this is universal! Be it a small builder or big one!

I am with Fred Griffin on this one. Which is why the builder will give in when you mention RESPA...I negotiate new construction fees most of the time. The problem is that agents all think that the builder is somone special who can do whatever they want, so they don't buck the system. 

I hate the controlled business arrangement thing because it is never good for my client.

Sure, they offer a perk to keep everything in house , and then jack the buyers cost up. Crunch the numbers. 

Speak up...you may be surprised at what you can change.  I work only for the buyer, so too bad if the builder does not like me bucking the system, that only means I am doing a good job for my client.

Eve

Perhaps it is time for an investigation, but more likely the builder just prefers that people use these lenders because they have proven that they can get the loans done on time.

If they push it too far, they will catch it from the CFPB for RESPA violations.

This is not confined to the Atlanta area.

It does seem unfair but you've read many comments justifying it.  In reality, It is only disturbing to those not in the "in-crowd".  You have to create your own "preferred status" group.  

By-the-way Aaron Mtuanwi , I really like your bio.  You've identified some compelling reasons for people to ask you for advice.  Use that!  

Nina Hollander nailed this one!

Aaron Mtuanwi This is not something new. The buyers always have a choice.

Not uncommon in my area - preferred is often associated with getting the job done on time and quickly

This is nothing new..small or large builders have an affiliation with certain lenders and title companies.

This does happen in our area. I have found that the preferred lenders work their tails off though to keep the builder happy. That's an account they don't want to lose. I have been able to get people the closing costs using a different lender in credit situations where the preferred lender doesn't have a program they qualify for, but another one does.

That is normal in the building business

Big builders have figured out there is money in financing! Happens all over!

This is a great strategy for the builders.

Too many lenders are quirky regarding new construction. Rather than be hassled by Well Fargo and Bank of America, the builder provides a solution that is beneficial and efficient for the buyer and builder and eliminates 90% of the squirliness of traditional lending for new construction.

Being a solutions provider is better than having a good fire department to put out fires when prevention is the solution. 

Agents should take this page from the builders play book and have a Plan B lender who is able to close in 7 day ready when the buyers lender goes wonky. Otherwise  we allow the seller, who hired us to keep them from making harmful decision, will be harmed by those big lenders a buyer chooses.

Not forced but certainly incentives are often offered for using a preferred lender by some builders.   

That's common with builders. One reason is, it helps them avoid appraisal problems. Buyers can always refi later, or in many cases, the loans are sold and/or serviced by someone else later. Agenst also have preferred lenders. I've seen builders offer free lofts and finished basements as incentives to make a sale. Buyers should take advantage of incentives. I don't see it as disturbing.

It does happen and consumers do have the choice to chose if they want their closing costs absorbed.  Is it a RESPA violation? No, since in most cases, the builders end up paying the closing costs, not the lenders.

no it doesn't happen....but all builders like to have the buyers use the institution that has the builders loan for the infrastructure and home construction.... much of it is related to the appraisal end of the transaction!

This has been standard practice in my area since I started in real estate almost 20 years ago.  If I were Dictator of the Universe, I wouldn't allow it -- but what can you do?  I've only had one couple opt to use their own lender instead of getting the cc.

Welcome to the club & it has been that way across the entire US for 30+ years that I've been doing it.  You either play their way or get no credits - that's the way it is.

Its the same everywhere- Builders can control that and many are financially involved.

Aaron,

Sounds like they may be pushing the envelope like Fred Griffin stated.  A

Builders push that here also.

This has been the case for as long as I've been in real estate.

We see that at several builders around here too, common practice.

Almost all new home builders in our area have a preferred lender and offer incentive based upon using that lender.  One must wonder why this is allowed by Respa but it is.

I've not seen this out here, but I don't have much new construction to deal with.  So long as the buyer isn't forced, there is no law being broken.  It is common on listings out here for the sellers to require all buyers to qualify with a preferred lender (at no obligation).

That happens everywhere. The lending bait is alive and  well ... 

I see it Maryland and Florida. I believe they use a preferred lender for a couple of things. 1. They are confident that the lender will do his or her job properly. 2. The lender will determine if the Buyer can really obtain a loan. If the builder is building a home specific for a buyer and they actually don't qualify, the builder is taking  a big risk. If they buyer doesnt like the incentive, find another lender that will provide the same. 

This is not an uncommon practise IMO

Not uncommon for a builder to work with specifics....

Yes it happens here as well

Sure, many builders have relations with lenders.

It sounds like you are on to something here. 

Yes, strongly encouraged and many times must complete an application, even when the buyers say they already have a lender.

Some builders require the buyer to get pre qualified by their lender.

We have a large builder who has done this

Some sellers do prefer working with their lenders ( offering some perks to it) but it is not absolutely required in here. 

Often builders have massive loans from a certain lender and by forcing the buyer to  use the same lender they reap benefits...it is not just in your market it is a Nationwide issue, Endre

Just about every town in America. Even on used residential homes often there is a preferred lender. Not obligated to use them but the lender can tell the agent how strong the buyer is. The listing agent does not like to work with out of the area loan agent due to reputation and their inability to deliver funds on time.

I have seen it happen in the past but not now. The builders do direct business to their closing attorneys and will counter the offer to make sure it happens. I don't like that part.

yes that happens all the time here