Janet Guilbault, mortgage broker headquartered across the bay in Walnut Creek, wrote a very clear, concise post about the varying loan interest rates and why they vary. We definitely need to be glad we have choices.
You are a Realtor who closed 2 loans this month. You notice that one loan is at a rate of 4.25% and one is at a rate of 5%. Do you believe the loan officer who charged the higher rate:
- Has OVERCHARGED?
- Is guilty of EXTORTION?
- Got lucky with a pristine borrower and took advantage of the situation?
- Needs to disclose how much money he is making to "protect" the buyer?
- Took advantage of the fact the buyer didn't "shop" enough for their loan?
This is a point of view featured (and supported by some) this week here on ActiveRain.
So let me ask you this. Which one of these people were OVERCHARGED?
- Molly, who pays $600 more a year for car insurance than her best friend because she has had 2 speeding tickets and one accident?
- Bob, who paid $10 for a hot dog at the World Series playoff game when he could have bought the same hot dog 2 blocks outside the stadium for two bucks?
- Allison, who bought a house using an FHA loan, and paid $10,000 more than the seller would have accepted from a CASH buyer??
- Christine, who paid 3 times as much to do her taxes as her best friend? Christine owns 8 rental properties and 2 businesses. Her best friend has worked for 20 years at the same insurance company.
- Barney, who looked down at his cash register receipt and realized he had not been given the SALE PRICE on his bag of potato chips and was overcharged by $1.50?
- Sally, who bought a house listed by her agent, for cash and a 15 day close? It was the first day her agent had listed it (and a 6% commission included for the agent)?
Answer: Only Barney was overcharged. He should go back and get a refund.
Some people believe that paying a premium to get exactly what you want, exactly when you want it, equals being OVERCHARGED.
And if you are someone who believes that the government should step in and mandate that ALL hot dogs cost $3 ($2 + the administration fee of $1), then guess what? You are never going to eat a hot dog at a ball park again, and every hot dog you do buy will carry some small print telling you exactly how much profit was made on that one little hot dog (that's what you paid the one buck for).
If you think the Realtor who got 6% for a quick sale "overcharged", then try working on commission and paying all of your own expenses for a year.
If you think people who drive recklessly should pay the same for insurance as a safe driver, then you must LOVE our health insurance system (without risk based pricing reckless behavior is never punished and everyone pays more).
Rather than be critical of situations where someone paid a higher price, we should celebrate our ability to deliver the goods in high risk situations (let the seller charge more for the FHA buyer!)
Rather than to call foul because someone appears to have a higher than market rate, we should celebrate his ability to buy the house (let the guy with the 645 score buy a house and pay more!)
And please, let me be able to buy a $10 hotdog and not miss a moment of the game. Let me pay more because my taxes are more complicated, and I want the best CPA out there. Keep on charging higher premiums so those lousy drivers will reform.
And if I ever look across the closing table at a hard working, dedicated Realtor, and believe he is gulity of extortion and overcharging (because he will be getting paid a commission)?
Just shoot me.
Take away thought: If open communication exists from the beginning of a real estate transaction, then concerns about the rate by the Realtor would have already been out in the open and discussed with the Loan Originator. A Realtor and a Loan Originator must act as a team with open communication at all times, in my opinion.
Written by Janet Guilbault, Mortgage Loan Originator Based Out of the San Francisco Bay