Austin McKenzie, Who you work with matters.

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Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Often the non-local lenders are internet lenders who are not always reliable. In reality, your buyer can't be forced to use another lender or even to get a preapproval from one... but the question your buyer needs to answer is if it's worth doing if that is what makes the difference between having their offer accepted or not. 

Feb 20, 2022 11:45 AM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
CEO of Vision Drive Realty - Coastal San Diego

I'm replying first to how your question reads: No, they can't force you to do that-it's illegal to steer to any lender; but I can see why they are concerned, since other states do things differently.

BUT....what I think you meant was "cross qualify"?

They can ask your client to "cross-qualify" but all that entails is having your lender contact the seller's lender to verify approval. That is done all the time. But your buyer doesn't need to talk to their lender.

My lender Jason E. Gordon cross qualifies my buyers for me often. I never let my buyers talk to the other lender - why trouble them?

Feb 20, 2022 11:08 AM
Buzz Mackintosh
Mackintosh REALTORS - Frederick, MD
“Experience, reliable, leadership”

If your in multiple offers sometimes a strong local lender letter can make the difference in getting the deal or not. Won a deal that way last year. No one can force a buyer to use a local lender however I have seen a similar situation w/ REO properties where the bank will require a pre approval from a specific lender.

Feb 20, 2022 02:25 PM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

I am with Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets on this. My lender cross qualifies a buyer's financial strength.  We cannot force a buyer to use a particular lender. We can as a condition of acceptance require cross-qualification with the seller's lender. 

Feb 20, 2022 12:00 PM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

Hi, Austin


    They are afraid of internet lenders (understandably).  However, that does not allow them to steer you to a local lender.    But as others said, if you want your offer accepted, you may have to play their game. 

    Get the extra preapproval; once you are under contract your Buyer can decide which lender to go with.


  Suggest,: call a real estate attorney and ask for advice.  Preferably a law firm that does Title Closings, they may give you the advice for free.  

Feb 20, 2022 03:09 PM
Lyn Sims
Schaumburg, IL
Real Estate Broker Retired

I do not trust internet lenders because the buyers punch in the numbers which might be accurate for all income situations. A secondary pre-qual is not bad advice.

Feb 20, 2022 12:16 PM
Tammy Lankford,
Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668 - Eatonton, GA
Broker GA Lake Sinclair/Eatonton/Milledgeville

Because some prequalification letters are about as good as cheap hotel toilet paper.

Feb 20, 2022 05:05 PM
Wanda Kubat-Nerdin - Wanda Can!
Red Rock Real Estate (435) 632-9374 - St. George, UT
St. George Utah Area Residential Sales Agent

Perhaps it is an effort to get your buyers to go with the local lender who knows laws and regulations in their state. I refer local, trusted professionals to my clients but they are free to choose their own as long as they are licensed to do business here.

Feb 20, 2022 04:25 PM
Bob Crane
Woodland Management Service / Woodland Real Estate, KW Diversified - Stevens Point, WI
Forestland Experts! 715-204-9671

Important to have a lender that is accountable and reachable.

Feb 20, 2022 03:49 PM
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Hello Austin McKenzie I don't think a seller can demand a buyer must use a local lender.

Feb 20, 2022 01:25 PM
John Juarez
The Medford Real Estate Team - Fremont, CA

Great answers here...but...lets back up a bit.

Confrontation with the listing agent by refusing to qualify with a local lender does not seem like a good way to advance the prospect for your buyer. Our purchase contract does not mention the name of a lender. It mentions loan structure but no specific lender. You can have a back-up plan with a local lender and it may be what make the deal work.

Feb 20, 2022 08:48 PM
Debe Maxwell, CRS
Savvy + Company (704) 491-3310 - Charlotte, NC

I get it! Those non-local lenders (mostly internet lenders) never seem to Close on time and this creates a giant snowball effect to many. I have out-of-state lenders who are amazing and I will vouch for them when things like this happen. So far, I've never had an issue but, the sellers don't know my lenders from Adam. It's best to play their game if my buyers want to win!


In this market, sellers often request that buyers be qualified by a reputable lender. It doesn't cost them a dime, doesn't impact their credit score and if it means helping them win in a bidding war, I would encourage the buyers to do this. 

Feb 20, 2022 08:29 PM
Gary Frimann, CRS, GRI, SRES
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
REALTOR and Broker

They can't force someone to use a lender.  I think it is just to get a second opinion as to whether the buyer qualifies.  To me, it is a rather inane practice.

Feb 20, 2022 05:59 PM
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

All lenders are not created equal.  Here in HI we prefer a local lender as some mainland lenders don't understand the nuances of resort properties/condos.

Feb 20, 2022 08:05 PM
Alan May
Jameson Sotheby's International Realty - Evanston, IL
A moving experience!

Nobody is forcing anybody to "use" their lender.  But many agents, when presented with a preapproval from a lender they are not familiar with, or one they don't have confidence in, may require your buyer to get a preapproval from a trusted lender, in order to assure their seller that this buyer is legit. 


And there's nothing illegal, steering or forced about it.  Your buyer doesn't have to USE that second lender... just get preapproved with them to convince the seller that they're loan-worthy.

Feb 20, 2022 06:29 PM
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

The short answer is most non local lenders are internet lenders that can not seem to close any loans which can mean the sale is doomed before you start

Feb 20, 2022 04:34 PM
Tony Lewis
Summit Real Estate Group - Valencia, CA
Summit Real Estate Group Valencia & Aliso Viejo

A pre-approval is worth about as much as the paper it is written on.  A local lender really means a lender that the listing agent knows and trusts.

Feb 20, 2022 11:28 AM
Doug Dawes
Keller Williams Evolution - 447 Boston Street Topsfield, MA - Georgetown, MA
Your Personal Realtor®

I am in agreement with Nina Hollander, Broker 

Feb 21, 2022 07:05 AM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

In reality, depending on market conditions, one side in a real estate transaction typically to be seems to be more flexible in terms of negotiating so their client can win.  "He who has the gold makes the rules".  

Feb 20, 2022 10:19 PM
Pete Beeda
Keller Williams - Bolingbrook, IL

First tie seeing such a thing. It's steering if they trying to push you to use their 'preffered' lender 

Feb 20, 2022 09:04 PM
Kat Palmiotti
406-270-3667,, Broker/REALTOR® - Kalispell, MT
Helping your Montana dreams take root

There are lenders (even here on AR) who are active in multiple states and can do a darn good job.... that being said, sellers and their agents may believe a local agent is better, and therefore, may want the buyer to use a mortgage professional they are familiar with. Honestly, there are local mortgage agents who stink and there are non-local ones that do also. It's important for a buyer to be using someone who can get the job done, regardless of where they are.

Feb 20, 2022 06:39 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

I have seen this many times, as non-local lenders (or Internet lenders) are notorious for not closing on time.

Feb 21, 2022 06:20 AM
Annette Lawrence , Palm Harbor, FL 727-420-4041
ReMax Realtec Group - Palm Harbor, FL
Making FLORIDA Real Estate EZ

Local lenders will use local appraisers. A Calif lender may use an appraisal pool located 90 miles away. I do see appraisers from ORLANDO.
If the listing agent is not inclined to do the appraisers work for them, directing to a local lender is more convenient
It's a heads up to the buyer agent to:
1. Make buyer more receptive in the mind of the seller
2. Communicate a buyer willing to be more compliant
3. This is the first step in the negotiation process. Resistance here, where it really does not matter could suggest an ambush where it does matter.
Listing agent is leaving clues, it is up to the buyer and their agent to follow along.

Feb 21, 2022 05:16 AM
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

Oh this was a common request during the heavy REO market. Use who you want, but we want our lender to verify that your lender doesn't qualify a ham sandwich routinely, and your PQ isn't written on TP.

I have seen more times than I can count out-of-area lenders who thought they could do Arizona and found out they could not. Thought they could do a manufactured home and found out they could not. etc etc.

We have a couple of loan peeps in our area who are just golden. This is what I tell buyers. Use who you want, but if I have a stack of offers all otherwise equal, the gold guys are at the top of that pile. My advice to the seller is: these guys don't screw up, we don't know anything about these other ones. Then they decide.

I may have conversations with unknown lenders to see if they can answer simple questions. I have encountered really good out-of-area lenders via some of those conversations.

Feb 21, 2022 04:54 AM
Roy Kelley
Retired - Gaithersburg, MD

Follow the regulations in your state.

Feb 21, 2022 04:40 AM
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

I'll go with the explanation by Alan May. Perhaps prudent and perhaps a waste of time. 

Feb 21, 2022 03:53 AM
Jason E. Gordon
CMG Mortgage, San Diego, CA - San Diego, CA

Objective commentary here (from the perspective of a Lender).

**While unnecessary in theory, this is a power move by the Listing Agent, and sadly, they hold all the cards nowadays

**Clearly a Lender must be licensed in the state where the subject property is located (otherwise the lack of legal ability to lend disqualifies the Lender right there and then)

**To assume a non-local Lender is better/worse than a local Lender simply by where they are geographically based is irresponsible, lazy, and short-sighted (literally)

**To assume a non-local Lender works at a transactional-based call center is careless.  Some do, some don't, but let's not take food off the table of a Lender unjustifiably based on loose assumptions. As an example, imagine someone assuming a property 30 miles from your office is too far out of your area for you to be a viable Agent to assist on an escrow.

**In my humble opinion, all Real Estate Agents should insist that a relationship (reputation) based Lender be used on ALL escrows (regardless of where the Lender and Subject Property are based). It comes down to professionalism, accountability & experience (newbies typically work in transactional-based call centers...this is where they learn the ropes...and trust me when I say that you do not want a Lender learning the ropes amidst YOUR escrow)

**Over the past few years, we have seen an industry-wide spike in homebuyers moving out-of-state. As a California-based Lender, I've had a ton of repeat clients seek out my services to buy property in other states. Personally, I think it is highly suspect for a Real Estate Agent to assume a non-local Lender is problematic (especially when I have funded loans for these clients in the past)

**The best practice when placing any scrutiny on the Lender is to determine the extent of the pre-approval (i.e. have all income/credit/asset documentation been reviewed? If so, by whom? Loan Officer? Underwriter?)

As others have commented, even if this Listing Agent insists that your client get pre-approved elsewhere, nobody can force your client on where to obtain his/her/their mortgage loan.  To insist the loan be funded with a particular Lender is steering and I trust that Listing Agent would stop short of putting that demand in writing.

Perhaps you can instead counter to a "cross-approval" and have the original Lender share the approval documentation with the Seller's (Listing Agent's) preferred Lender. Personally, this is a service I offer to each of my Clients/Agents. It saves the Clients a credit inquiry (imagine them getting an unnecessary credit inquiry AND not getting their offer imagine that happening multiple times).

Hope this perspective helps.

Feb 22, 2022 08:24 AM
Carla Freund
Keller Williams Preferred Realty - Raleigh, NC
Carolina Life RealEstate & Relocation 919-602-8489

You have some great answers here. Each state has unique contracts and situations. While an agent/seller can't control the lender that is used, a local lender is viewed as better since they know the contracts, the timeframes, etc. I often call the lender just to see if they're responsive, have pulled credit, and have a good sense of whether or not the buyer is really pre-approved. Most buyers can get a pre-qual from someone on the internet. The question is can that lender follow through and in a timely manner.

Feb 21, 2022 11:00 AM
Don Baker
Lane Realty - Eatonton, GA
Lake Sinclair Specialist

Lots of foreclosures required cross prequalifying in the last 10 years.  Never an issue for my buyers, their loan officer just called the owning lender and handled it.

Feb 21, 2022 10:40 AM
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Two reasons come to mind swiftly. 1. They want their guy to make-out and 2. How do they know your guy can perform? Is it legit? The listing agent has control and as such can do whatever they want is the general rule

Feb 21, 2022 08:41 AM
Compare Closing LLC
Compare Closing LLC - Dallas, TX
Let the lenders compete for your business!

Please visit the link for your information:

Jul 05, 2022 02:53 AM
Caroline Gerardo
Licensed in 20 states - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

A preapproval with a commitment by Underwriter from unknown company might not feel strong. Listing agent can't make them close with in house or buddy in the business BUT it's likely if they don't cooperate, they don't get accepted. Here are two work arounds: Lender who offered pre approval gets buyer authorization. They send the MISMO 3.4 file, credit report, income verification, front page of bank statements. Buddy can review everything but is not authorized to re-pull credit.  Extra work for everyone but gets to finish line.   Or buddy lender talks with buyer lender and checks off what is in the file verbally

Feb 22, 2022 03:06 PM
Anthony Kirlew
Group 46:10 Network @ eXp Realty - Gilbert, AZ
Helping You Make Fiscally Sound Real Estate Deals!

In this competitive market, some selling agents prefer a local lender because some online lenders have a reputation (right or wrong) of being hard to reach, or failing to close on time.

While no one can tell a buyer who to use, they can certainly advise their seller client to choose a buyer with a local lender over one without it. 


Feb 22, 2022 12:04 PM
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

It doesn't sound like a legal practice. There are many reasons why local lenders may be preferred, but it cannot be made a legitimate requirement to secure acceptance of an offer.

Feb 22, 2022 11:45 AM
Jeff Pearl
RE/MAX Distinctive / LIC in VA - Lovettsville, VA
Full Service Full Time Realtor

That was common practice with bank owned properties. Some lenders wanted to be assured of the financing, and if they know that they would approve the financing, then they figured everything was fine with any other lenders that buyers wanted to use. Being approved by 2 different lenders should make a buyers offer look stronger.

Feb 22, 2022 04:33 AM