Real Estate Q & A - Do I have to use a particular bank for my pre-approval?

A client recently asked the following question about a home for sale in Fredericksburg that was a foreclosure property.

Question:  "The listing says that the purchaser must be pre-approved by Bank of America.  Do I have to use them for my pre-approval?  And, do I have to get my loan through them?"

Answer:  The answer to this question isn't specific to Bank of America.  Bank of America was just the bank in question on this particular listing.

A condition of making an offer of many foreclosure properties is that the prospective buyer must pre-qualify or be pre-approved by the bank who owns the REO (Real Estate Owned) property.  REO is a legal way of saying the bank has foreclosed and now owns exclusive right to the property.

The bank's purported position is to have buyers prequalify with them so that they have reasonsable certainty that the buyer is qualified to buy the property.  Most feel that the true reason is so that the bank who owns the property has a chance at reclaiming some of the money lost on the foreclosure through the new loan on the property.

In any event, the answer is yes, if the bank says you must prequalify with them to make an offer, then you have to do it if you want to offer on the property.  But, NO, you do not have to use them on your new loan.  They can assert that you must prequalify, but they cannot assert that you must use them for the loan.

The real estate question and answer segment is comprised of questions we receive here in the Fredericksburg real estate market.  Many of the questions, even though specific to homes for sale in Fredericksburg, are pertinent in other parts of the country.

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