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Preventing Fallout: 5 Questions Every Agent Should Ask (Part I)
Preventing fallout is a high priority right now in this shakey market. Escrows are falling apart at unusually high rates. The usual issues, repairs, property values, and buyers remorse, are now coupled with short-sales, bank REOs, and contingent offers. These are professional realities for those of us in the business, and much of this stuff lies beyond our control.
But one factor within every agents control is buyer pre-qualification.
Over the past few years we successfully taught buyers to get pre-qualified before they go home shopping. Then we kicked back, thinking the job was done. Today, buyers show up already pre-qualified, and they dont necessarily want to talk to your lender.
No seasoned agent I know today would think of putting a buyer in their car without first knowing they can qualify. And yet most will accept a pre-qualification letter from a total stranger. So, to better control that which we can, here are 5 Questions Every Agent Should Ask when a borrower comes to you pre-qualified by someone you dont know.
Question #1: Do you have a down payment?
Youre looking for a yes, but dont stop there. You need to ask how much money they have and where its coming from. Lenders prefer seasoned funds, money that has been sitting in bank account for 6090 days. They may also require reserves as well. If the money is really a loan from uncle Charlie, an advance on the Visa, or in the Folgers can buried in the back yard, you may have a problem.
Lenders do sometimes allow gift funds but may still want the buyer to have some skin in the game. Borrowers are often vague about cash, but this is no time to wimp out. Pretend your a doctor and just tell the patient they need to take off their clothes.
If the answer to the cash question is no, ask if they have any money for closing costs and reserves so youll know in advance whether a seller credit will be part of your price negotiation. Then move on to Question #2. Keep in mind that 100% financing is becoming very difficult these days. Borrowers will need high credit scores and theyll have be able to fully document enough income to keep debt to income ratios reasonable.
Ill end the first installment there. Stay tuned for Part II.
June 21st, 2007 at 12:36 pm
[...] Starting a Controversy on Your Real Estate Blog to Drive Traffic – I have a secret, and I want to share it with you. I did something recently that made a lot of people mad, and they probably hate me now. But hey, at least they’re talking about me. And that’s what’s important anyway. You see, when people talk about you, you get recognition. And recognition brings you traffic. New blogs, or in my case, a new blogger, needs to stir the pot a little to emotionally engage readers to induce commenting. You want to know what I’m talking about, don’t you? You know you do. » original newsSalt Lake City Home Remodeling costs: What’s The Payback? – Which home remodeling projects will return you the most increase in home value? » original newsPreventing Fallout: 5 Questions Every Agent Should Ask (Part I) – Preventing fallout is a high priority right now in this shakey market. Escrows are falling apart at unusually high rates. The usual issues, repairs, property values, and buyer’s remorse, are now coupled with short-sales, bank REOs, and contingent offers. These are professional realities for those of us in the business, and much of this stuff lies beyond our control. But one factor within every agent’s control is buyer pre-qualification. » original newsNaughty North Fork, Long Island, Realtors – Why would your sign have an “EXCLUSIVE” sign rider on it if it is being presented to the full community of real estate agents? There appears to be only one reason: GREED. Real estate professionals that bring buyers to the North Fork from other areas avoid EXCLUSIVE listings. If they are out showing properties, and their buyers express an interest in a property that has an EXCLUSIVE sign rider on it, they will likely let their buyers know that the listing company will have to be contacted directly by the buyer. Many buyers would prefer to look at homes with their real estate agent, and will, as a result, bypass your home. It is common knowledge and practice that these riders have nothing whatsoever to do with any term in real estate except the above. Don’t be fooled. » original newsNaughty North Fork, Long Island, Realtors – Why would your sign have an “EXCLUSIVE” sign rider on it if it is being presented to the full community of real estate agents? There appears to be only one reason: GREED. Real estate professionals that bring buyers to the North Fork from other areas avoid EXCLUSIVE listings. If they are out showing properties, and their buyers express an interest in a property that has an EXCLUSIVE sign rider on it, they will likely let their buyers know that the listing company will have to be contacted directly by the buyer. Many buyers would prefer to look at homes with their real estate agent, and will, as a result, bypass your home. It is common knowledge and practice that these riders have nothing whatsoever to do with any term in real estate except the above. Don’t be fooled. » original news [...]
August 21st, 2007 at 12:06 pm
[...] If you are a listing agent, counsel your sellers to be flexibile and patient. Request more detail about the lender involved, the borrower’s qualifications, Fico scores, or the type of financing involved. But if you can’t be a little adaptable in this market, your buyer may decide to leave the party before it gets started. [...]
August 22nd, 2007 at 2:03 pm
[...] This is the final post in a series designed to help agents prevent fallout that can occur when you work with an unknown lender. Part I was aimed at down payment. Part II was all about income. Part III focused on credit, and Part IV on pre-approval. Today we’ll find out who our client is working with. [...]