Bait and Switch Mortgage Strategy
June 10, 2019 | Posted by: Mike Garganis
When buying a home, you can encounter dangers at every corner: from thieves posing as lenders or lawyers, who usually prey on the elderly, to the old bait and switch.
Bait and switch happens when a customer is offered something for an attractive price, also known as the bait, which will no longer be available when the customer decides to go ahead and make the purchase. After the customer realizes that the initial offer is no longer available, he or she will be presented with a new offer, with less attractive terms, also known as the switch.
Some mortgage agents and brokers usually do the bait and switch by advertising low interest rates in order to get many potential clients interested. These interest rates are promoted in newspapers, on TV, on the radio, on billboards and posters, and rate sites, but, when the customer shows up and applies for a mortgage, he or she is told that those were last week’s rates or that they are reserved only for those with very high credit scores and a very good financial situation. Of course, because bait and switch is illegal, agents/brokers disclose all this in the small print, which is usually too small to read in a newspaper, moves too fast to be read on TV, or is simply disregarded by most people who are looking for a mortgage.
When potential customers call a broker to inquire about the low interest rate, they find out that the rate is no longer available, but are offered a new rate. This new rate won’t be as great as the one that is advertised, but is usually not that much higher. However, a small increase in interest can mean thousands over time, so make sure that you understand how much more you will be paying before taking the lender’s offer. Ads in newspapers are also at least one day old because it takes at least one day for the newspaper or magazine to get published.
While most brokers are truthful when advertising interest rates, most take advantage of things like fine print and are just happy to get customers interested, even though they are unable to offer what they promised.
Unfortunately, many customers fall for the bait and switch due to the fact that there are so many ways brokers are advertising these low rates: the rate sites (which are run by brokers) and online searches are the biggest culprits.
When searching for a mortgage you should give yourself time to shop around and find what’s best for you, and not let brokers use the bait and switch mortgage strategy on you.
Work with a trusted agent/broker, get some referrals and read up on where and how they are contributing to the mortgage industry.
Also, don't fall for social perception. It's where brokers/agents, (not just in the mortgage industry either) claim to have thousands of social media followers, yet if you look at their followers, you will see they are paid fake accounts.
Always looking out for your best interests.