Why Realtors Ask Buyers to "Cross-Qualify"

Frequently, Realtors in the Long Beach area will ask buyers to "cross-qualify" with a particular lender when they submit an offer, and buyers frequently ask me why.

"But we've already been pre-approved with xyz lender," they will tell me. "Can't we just give the seller and listing agent that letter?"

If the listing agent is someone I know (and I've worked with most of the top Long Beach listing agents over the years), and if the buyer is pre-approved with a lender I've worked with and can vouch for, we can sometimes get around that requirement. I understand that the buyer has just provided mountains of paperwork to their own lender and they don't want to do so again. Having their credit run again and sharing personal financial information with someone who may have a relationship with the seller or listing agent isn't something most buyers relish.

To be fair, sometimes the requirement for cross-qualification appears to be an attempt to drum up business for the specified lender. Incentives like free approvals or waived fees may be offered if the buyer chooses to work with that lender.

But I think most of the time, it's because the listing agent is trying to protect the seller's interests by ensuring that the buyer has a strong probability of being able to obtain a loan. At the end of the day, unexpected delays and failure to perform can cost sellers. Some lenders are more diligent in the pre-approval process than others and a desktop underwriting approvalis meaningless if the lender hasn't actually verified the information and inputted correct numbers into the system.

Recently, I had a client who accepted an offer from buyers who were "pre-approved" with a lender their Realtor had worked with for years. Despite the desktop underwriting approval he provided, I had a bad feeling about the lender and noted a few "red flags." Had we had an identical offer in hand with financing from another lender, I would have recommended my client take it instead. But we didn't.

Ultimately, their lender was unable to get them loan approval. The buyers' agent came to me, asking for an extension of the loan contingency and I advised the seller to grant it on one condition -- the buyers agreed to cross-apply with a lender of our choosing. They reluctantly agreed, but in the end the lender that I suggested was able to get them the loan -- and as we closed escrow, their lender was still desperately trying to get the loan approved. At the end of the day, the buyers' Realtor thanked me and has now begun referring buyers to my lender.

Shannon Jones, CDPE and PSC (Pre-Foreclosure Specialist)

Keller Williams Realty

562-896-2456 // 562-335-1965 // www.ShowMeHome.com

 

 

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