Mary's Blog

What should "Pre-approved mean?

Mary Cioffi, GRI, CSP, SRES (Coldwell Banker Itildo, Inc) — Tue, 05 Feb 2008 08:43:39 -0600

In 1984 when I starting selling homes in rural Nevada we were taught to qualify a buyer in our office before we spent any of our valuable time showing them homes. We asked them fairly simple questions like; "How much do you make? "How much do you owe? And "How much do you have in the bank." We did this so that we would know what price range the homes should be in before we put them in our car to show them houses and if they were a able to afford a home.

I have always considered myself a REALTOR who embraced change and I have seen many great changes in our industry in the past 25 years. I was the first in our town to use a cell phone. I was one of the first to own a computer, an IBM PC junior. I brought back the first INFO box from our 1989 convention when I was incoming board president. Everyone laughed at me and said "No one will get out of the car to take a flyer out of that!"

One day it became popular to send a buyer directly to the lender who would loan them the money to purchase the home to be prequalified. Buyer would see how much their payments would be, how much home they could afford, what loan programs were available (such as FHA and VA) and frankly, they could see if they liked the person they were doing business with. Loan officers would tell them how much house they could afford to buy. Sellers were impressed when we brought along a note from the lender with an offer to purchase a home saying these buyers were prequalifed. We didn't have FICO scores back then. Once this process became popular we did not hear the term "It fell out of escrow" quite so often. Our average escrow was 60 days long.

The language of real estate changes constantly and a good agent must keep up with the changes. At some point a prequalifed buyer was looked at as the buyer a busy mortgage broker asked qualifying questions but did not actually pull their credit report. The standard was "If everything the buyer says is true, they can afford this home." Prequalification actually meant preliminary review.

A few years back we went from prequalified to preapproved. The standard then was prequalifed meant that the lender has interviewed the buyers and reviewed their application and pulled the credit report. A stronger preapproval letter meant these buyers have completed the process. The loan officer has reviewed and verified the information and sent the loan package on to underwriting. The preapproval would state that the buyers qualified to purchase a home in a certain amount and the loan would be subject to the home they selected for their purchase to qualify as well,. The lender needed only to be assured that the property value was sufficient for the lender to take the risk. This now became the standard of the industry. However, as near as I can see... this standard is not in writing anywhere.

Today I received a purchase contract owith a preapproval letter attached and stating that based on the mortgage company's initial analysis and credit rating the buyer was preapproved to purchase a home in the amount of $599,000. My assumption was that because this was a preapproval and not a prequalification the loan officer had sent it on to an underwriter. I was wrong. The lender informed me that "prequalifed/preapproved is the same thing, The loan isn't approved until it is approved". Has the standard for our industry once again has changed? It is now necessary to ask more questions? Where I believed that the ‘pre' in preapproval meant ‘before home selection' it really means before the loan officer has completed their job.

As our industry changes and agents strive to present the strongest offer possible to have a competitive edge over another buyers offer or to show the seller they have a good solid offer in front of them we need to constantly demand stronger letters with stronger language from loan officers to include with the purchase offer. Many sellers, especially with new construction will make substantial financial commitments into the property as soon as escrow opens to be assured the home is ready for a certificate of occupancy in time to close escrow. We as listing agents owe the sellers the assurance that the buyer is truly able to qualify for the loan before the seller increases his investment in the property. For the listing agent to do a good job for his seller the buyers agent needs to insist the buyers loan officer get a real commitment from the underwriter. The pre in preapproval should only mean before the home is selected. This way the buyers offer is stronger, the seller is at less risk (and thus less nervous )and both Realtors appear as true professionals doing the best job possible for their clients.

Tell me when your market starts to vibrate

Mary Cioffi, GRI, CSP, SRES (Coldwell Banker Itildo, Inc) — Wed, 09 Jan 2008 23:01:10 -0600

The Northern Nevada real estate market reacts directly from the California real estate market. So would all you California agent prepare us when you feel a little real esate activity rumbling? I would love a heads up so I can have a little extra advertising in place if and when it starts. Please tell me it will come as soon as out snow melts and the sun comes out. I would love to keep an upbeat positive attitude. I may need a little support group therapy from all our friends at Active Rain.

Help I need advise on a stinky house!

Mary Cioffi, GRI, CSP, SRES (Coldwell Banker Itildo, Inc) — Sun, 09 Dec 2007 20:09:59 -0600

I have these older 'mature' clients with five dogs, two cats, and a room full of large birds. There is an old dog, a new pup and perhaps a few in between that are not housebroke. The bird cages get cleaned infrequently and the litter box in the "cat room" is overwhelming. I first showed this home when it was listed with another agent. When the owners were home they asked me to honestly answer if I felt their home smelled like dogs... "I replied.... "Honestly... I don't smell dog. I own a dog. It is overpowered by the smell of cat." It was so bad that hours later I could still smell it on my clothes. Months later the listing expired and they called me to list the home. I told them I suspected that since they live with it daily they just don't smell it. But really I suspect it is also that since they are mature their noses are just not as sensitive as my younger clients. I told them I would be willing to list the property if they were willing to invest some money to prepare the house to sell. They had already removed the carpet on the previous agents advise. She also intelligently suggested they didn't replace it as it would be quickly in the same condition as the first carpet. Moving out is not an option. After all, who would rent to them?

I had them remove all the rest of the carpet, and pad and treat the floor with Clorox wood and then one of the products intended for animal odor and we are now in the process of putting travertine tile thru-out the house. A huge and costly adventure. But it made me think while I sit in front of my computer on ActiveRain that perhaps someone else might have a bit of advise. This is a wonderful home, constructed by a respected builder and only about five years old. It is in a highly desirable neighborhood. In spite of their weakness for their animals they are the nicest people. They really need to sell in a bad market. The location will sell it. But only after all the other homes for sale in this limited neighborhood are sold. Any advise anyone?? Help!

Should the feds help people who got into a bad mortgage?

Mary Cioffi, GRI, CSP, SRES (Coldwell Banker Itildo, Inc) — Sat, 01 Dec 2007 09:35:56 -0600

Some people would say that anyone old enough to buy a home and qualify for a loan should take responsibility for the loan they got themselves into. After all they are adults. However, we all could be guilty of trusting the professionals we hired to sell us a home and provide us with the money to pay for it. It is an area of expertise with a language and life all of it's own. So perhaps we all can agree that 'shame on ignorant people who bought homes with bad loans and didn't read the fine print' I believe, it could have happened to many of us if these market conditions were around with these lenient lender rules when we were younger or less experienced in real estate transactions. If the loss of their homes only effected them I would not be writing this blog. The effect of people losing their homes due to their ignorance of the world of borrowing money will trickle down to all of us. The market is being flooded with foreclosures. Property values are dropping simply because supply exceeds demand. People who really need to sell their homes because of real life issues, like a job transfer, divorce, the family got bigger or the kids went to college and the family got smaller can't sell. These people are getting hurt because it is difficult to sell their homes without a serious reduction in the price. People who lose their homes move into rentals. The investors who purchase these foreclosures will turn them into rentals. They will allow the tenants to make their mortgage payments until the market conditions change. So the rich will get richer and the poor and struggling will get poorer and struggle harder. The person who lost their home may have to pay lower rent but come April 15th they will have lost the biggest tax deduction they had. I say "Yes, the government needs to step in with a little help here." We only need government for those things we cannot do for ourselves. We cannot balance the nations real estate investments now . . . not by ourselves. It is bigger than one homeowner. It is bigger than all of us. It needs a national solution because it is a national problem.