- The Washington Times - Friday, October 16, 2009

I want to share with you a situation I was recently involved in that didn’t sit well with me. I was approached by a first-time homebuyer who was looking to make an offer on a town house that had been on the market for a very long time. The borrower had excellent credit and a 10 percent down payment. The automated underwriting system offered by mortgage giant Fannie Mae approved this fellow for a $250,000 loan, although his debt-to-income ratio was on the high side.

I told him that he was stretching himself with the mortgage payment and advised him of the other expenses associated with homeownership. It was clear to me that he had done his homework and was willing and able to manage the monthly obligations associated with the purchase of this home.

While I normally don’t advise folks to stretch themselves financially when buying a home, I think it’s OK for first-time homebuyers with an increasing income to push themselves a bit.

The borrower found the property without the use of a real estate agent and decided to write an offer with the agent who was listing the property. The listing agent represents the seller, but there are times (called dual representation) when one agent represents both the buyer and the seller.

While dual representation requires careful disclosure to both parties by the agent and is not uncommon, intuitively one might compare this arrangement to a fox guarding the henhouse. The real estate agent must be very careful.

This brings me to my story. After I prequalify a borrower, I usually receive a call if a price was agreed upon and a contract was ratified. We then lock an interest rate and finish the formal loan application.

This time, however, I receive a call from a woman who identifies herself as the listing agent of the property. She tells me she has entered into a dual agency agreement with my borrower, the potential buyer. I ask her if they have ratified a contract. She tells me negotiations are still in the works.

She then proceeds to tell me she’s calling me without the borrower’s knowledge because she wants to find out if the borrower can qualify for more than $250,000. This is when I raise my eyebrows. I tell her it isn’t my place to discuss his qualifications outside of the information she already has.

With an increasingly belligerent tone, she informs me that this fellow is a first-time homebuyer and that he is “green.” I suggest that she is compromising her ethics by calling me without her client’s consent and that it appears she is “fishing” for information to see if she could convince him to make an offer for more than what he is prepared to pay.

In the end, the borrower cancels the contract. I’m no real estate agent, and I leave their duties to them. However, the whole event strikes me as ethically questionable. It seems to me a dual agent shouldn’t contact her client’s lender without his knowledge and poke around for personal financial information.

Henry Savage is president of PMC Mortgage in Alexandria. Reach him by e-mail at [email protected]

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