Warren Buffett once said “price is what you pay…..value is what you get.”  When it comes to real estate transactions, this is quite true.  For example, when exploring options and choosing a mortgage lender, a borrower may decide to give his business to the one with the lowest interest rate. The lender could be a bank. Often this is an online lender.  The online lender touts the lowest rate available and the ease with which they can process and approve a home loan.  So, the borrower applies with the online lender and the process begins.  Of course, there is no face to face meeting.  Everything is done online.  The closest thing to a relationship between the borrower and lender is a phone conversation, which is brief.  Now, the online lender may indeed have the lowest rate and may be able to complete the transaction.  But what happens if problems occur during the transaction?  When I say problems, I also mean turbulence…..rough spots, such as a low appraisal. Online lenders simply contract with an appraisal company they find near the area where the home is located.  The online lender has no relationship established with the appraisal company, and they use the appraisal company because perhaps they are the least expensive and are licensed to do residential appraisals.  This may work fine for the online lender, but what about their client, the borrower? Using just any appraiser can spell trouble for a real estate loan, believe me.  When there is no expectation of future business from the online lender, an appraiser is far more likely to be overly cautious and prudent in his assessment of value.  Furthermore, he is likely to cite repairs to be made even if they are minor and tedious.  How do I know this happens?  Twenty plus years of mortgage lending experience, that is how.  It happens all the time and a borrower who decides he needs to go with the lender with the lowest rate is not always making a wise decision.  So, OK, he is getting a low price, but what about the value?  The online lender is not interested in future business or the reputation of how they conduct business.  They are in it for the transaction, and that is all.  They do not attend the closing and if an appraisal comes in low, an online lender is not at all likely to pitch in and work through the problem.  Many times over the years I have intervened on my clients’ behalf when turbulence occurred, not just for my borrower, but also for my realtor partners and even the seller. Intervention on my part can be several things, but often it is my persuading underwriting to work with me and approve a loan.  Sometimes I help my realtor partners or even a borrower with money when funds are short and we need to close. This kind of participation and help is something I provide because I value my business and most of all my reputation.  A solid reputable business is not easily acquired.  It is earned, and is something I cherish.

     An online lender or just any lender with a low rate helping out like this?  Friends, it won’t happen, rest assured.  As I stated at the beginning, price and value are two very different things.  So what if a lender is .125 or .25 percent lower on rate?  When push comes to shove if they cannot deliver or if they leave parties to a transaction twisting in the wind, what do you have?  Nothing, that’s what, or at least some very regretful folks who should have been wiser in their choice of lender.

Post contributed by Rena Rogers with AmericaHomeKey (770) 387-4504 ext. 208 www.renarogers.net

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