Real Estate Blog - BUYERS NOT BEING PRE-QUALIFIED.. IS THIS PUTTING THE CART BEFORE THE HORSE?

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BUYERS NOT BEING PRE-QUALIFIED.. IS THIS PUTTING THE CART BEFORE THE HORSE?

I have a few clients that are buyers and they all feel they are in the driver's seat. One actual mentioned to me that they know more about real estate then I do. I just smiled to myself... for they are a first time home buyer. Yes, you heard me right on that one.

Two of these clients (that are buyers) do not feel they should be pre-qualified first before I show them homes. They feel that once they find a house, they will get that letter. When I inquire what they can afford, and how they can substantiate this, by wanting to know what bank is working with them. They have no idea. When I mention that I'm an Accredited Buyers Representative, and that I'm looking out for their best interest, they look through me like I'm not there.

When I politely ask if they would like me to show them $300k homes, they like this idea and want to go out and take a took immediately. After all, they are also going to get a $8,000 tax credit to help them with the purchase of this home.

Then I inquire that at the time they do find a home they like, and is say for $295k which is $5,000 less than what they wanted to spend... and the bank they plan on going with only says they qualify for $200k and this home would not work for them. What will they do then? They had no answer for this.

I made it clear that I will be glad to help them out, and work with them to find a home ONCE THEY GET PRE-QUALIFIED. The horse should go before the cart.. not the other way around. I'm not going to waste the sellers, my clients or MY TIME just spinning my wheels.

How would you have handled this scenario? Would you have done it differently?

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VALERIE OSTERHOUDT

Info about the author:

Valerie Osterhoudt is a Cromwell Connecticut Residential Realtor who can assist you with the purchase and/or sale of real estate in the Middlesex County of CT, which includes Rocky Hill, Berlin, Middletown, Wethersfield, Newington, as well as all other surrounding areas. Please visit me at www.CTrealtorMLS.com for all your relocation and/or local needs.

If you're thinking about buying a home in Cromwell CT there are plenty of great buys in today's market. There is no better time than now to take advantage of these homes while interest rates remain at an all time low. For more information on Cromwell CT real estate's homes and/or condos please visit Johnson Real Estate to access the newest listings.

Valerie Osterhoudt, ABR - Johnson Real Estate, Inc. - 860.635.0387 #2 - valerierealtor@sbcglobal.net.

Posted by Valerie Osterhoudt, ABR ~ Cromwell, CT Real Estate ~ 860.883.8889 on 04/08/2009 02:03 PM

Comments (28)

Pre-Qualification, Tax Credit in the Home Buying Channel

first time home buyers, prequalification, tax credit, cromwell real estate agent, valerie osterhoudt

Originally posted at: Valerie Osterhoudt's Blog: BUYERS NOT BEING PRE-QUALIFIED.. IS THIS PUTTING THE CART BEFORE THE HORSE?

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28 Comments on BUYERS NOT BEING PRE-QUALIFIED.. IS THIS PUTTING THE CART BEFORE THE HORSE?

APR

Valerie I would of handled it much the same way.

I had someone the other day that wanted me to pre-qualify her but would not let me pull the credit, because her Realtor told her that since she had already had her credit pulled to not let anyone else do it. That she should offer them a copy of the credit report already pulled.

Just a little problem with that, I need to attach a credit report to an application before I can run it through Automated Underwriting and that needs to be one of mine. If I can not run it through Automated Underwriting I will not give a pre-approval.

I love it when someone else decides how I should do my job.

Hi Valerie,

I would have done the same. I always explain to my buyers that they should get the pre-qual done first...so they know what price range to search. Why fall in love with the perfect house if there is no way they will qualify for it, ugh. There are too many agents out there that will show everything....even write offers...and then act surprised when their clients can't get the financing. Talk about a waste of time!

Talk to you later - have a good day :)

George... I find it amazing too, that others always know your job better than you do. However, they are not in your field, so HOW DO THEY know all the In's and Out's?

I'm not going to waste my time, gas, and sanity running around for these people.

valerie osterhoudt

Kara... I know of these agents too. I just can't figure out why they would do this. Not only is it a waste of time, like I mentioned, but it is a disservice to the buyer. This would show we don't know what we are doing, and this is probably where some of our bad reputation comes from

Hope all is well with you too.

valerie osterhoudt

Valerie-I say the same thing as Kara-There is nothing worse than finding a house you LOVE and then finding out you CAN'T AFFORD IT. I won't work with someone until they are pre-qualified because it can turn out to be a big waste of time. One of the guys in my office does it differently and it works for him but it doesn't for me.

Besides not being able to afford it, there's always the chance their credit score isn't up to par. Just yesterday I finally got this lady to talk to a lender. Looks like she needs to pay a couple of things off before she'll qualify.

I'll ask new buyers what they want their payment to be, then give them a rough estimate of their price range. I'll take them out once to show them what they can buy. If they don't meet with a lender after that then we're through.

Valerie - Your buyer probably also knows WAY more than any home inspector so I''m sure that they will want to waive it. Keep a good comm log with this one and make them sign everything that you show them.

We have had clients think they would be able to afford a specific price range, only to find out from their lender that they can't do anything until they fix their credit.

APR

Debra.. Thank you for your comment. When this has now happened twice, I'm thinking that I'm approaching this the wrong way. I'm glad to hear that I am not. Like you I can't see clients finding a home they like only to find out that they *can't afford it*. I wouldn't be doing my job, and it would be a disservice to them if I did work this way.

valerie osterhoudt

Valerie - I certainly think not being pre-qualified is putting the cart before the horse. Afterall, many buyers think they can afford more than they can actually qualify for. And, in this market where good listings often have multiple offers, you want to be able to act fast. It's essential to have your ducks in a row.

Not only is it a good idea to get pre-qualified or pre-approved to make sure that you can buy a house, a buyer may also be surprised that they can go higher than they anticipated. The best thing that any prospective buyer can do is to work with the lender BEFORE they go out to look at a house.

It is amazing to me that you may still have buyers out there that think they don't need to do this.

APR

I would have done the exact same thing that you did. It's amazing to me that even live and breathe real estate that the average Joe thinks they know more than I do. They listen to the news and read the papers and watch HGTV and then they are an expert! :)

APR

I think you handled it the way I would have. I often do show clients property without pre-qual. But not first time home buyers. My client base usually consists of people looking for a second/vacation home with substantial down and if a client tells me something like we'll be putting down a minimum of 20% and are looking between $300k and $400k and tell me what their jobs are then I'm not so worried about them getting to the lender first. But first time buyers... bank is their first stop before they get in my car, unless I'm driving them to the bank to visit a loan officer and I have done that too.

Hi Valerie, You did the right thing. Sometimes I really wish that it was manitory for buyers to be pre-approved before showing property. If my memory serves me correctly, when I was in real estate in the late '80's bring only pre-approved buyers through seller's homes were a way of selling our listing agreement to sellers. Just think of all the time it would save everyone. And yes, I do love the ones that come and know my job better than I do; even without all the classes and testing we have to do.

Hope you are doing well. I took some time off the Rain and see that you haven't been on much either...

APR

Valerie, you did an excellent job of explaining to these Buyers the need for getting prequalified. What I never understand is why people are sometimes so reluctant to act in their own best interests.

APR

There are different levels of a pre-qualifications. Some are worthless depending on where they come from.

I prefer to have the buyer fully underwritten with the home TBD. However, I will work with buyers that have gotten a desktop underwriting approval.

They are all lookie Lous until they are pre-qualified in my mind. I do sometimes bend the rules for First time buyers or people who need a little educating. But I never spend much time with people who are not and refuse to be pre-qualified.

APR

Connie.. It makes sense all the way around to see what you qualify for. I know, I'm preaching to the choir. If someone's credit scores are low, they might be able to still get a home, but the interest rate would be higher, and the amount of home they could afford would be lower.

valerie osterhoudt

Stephanie.. That is also a good approach. I just worry that showing a home the buyer might like, they might now qualify for it once they meet with a lender.

valerie osterhoudt

Steve... I've pulled the credit report on this client for a rental property they were interested in. There is no way they can afford a home with such a poor FICO score. This is why I want them to talk with a lender.. not only will they maybe get it through their head, but they could work on building it up again.

valerie osterhoudt

Myrl.. What I am finding out is that most buyers don't believe a Realtor, and know more than we do. Go figure. After all the schooling, continued ed classes, and experience.. they know more than we do. Why they don't want to get their ducks in a row just shows how little they truly do know.

valerie osterhoudt

Philip... Thank you for your comment.. You sumed it up nicely. If one is not pre-qualified or pre-approved, it would be the blind leading the blind. Why waste everyone's time?

Buyers that don't get pre-qualified first usually can't afford anything... at least this is what I have found over the years.

valerie osterhoudt

Jared... EXACTLY. This client watches HGTV, and told me that they know more about homes and how they are built, than I do. I quickly asked them a question on aluminum verses copper wiring. They didn't know the answer. Does this surprise you? It takes all kinds, but why do we have so many in real estate?

valerie osterhoudt

Tammy,This client is just ignorant, and has their nose in the air. I've stressed my point with them, and until they have a pre-qual letter, I'm not sending them anything. How can I? I don't even know if they can afford a home/condo.

They told me what they qualified for 2 years ago. Since then, they have changed jobs and have taken a pay cut. You tell me where they qualify for the same amount.

valerie osterhoudt

Teresa... You summed it up nicely too. It gets to the point when a buyer (first time for that matter) knows more than we do after years of being in the business, I say "see ya". It took me a while to learn this, but every time, these buyers don't even buy anything. Why? They can't afford anything, and usually only have a big mouth to flaunt what they don't have.

I got burnt out on AR.. I had nothing to say. LOL. As you know that is a new one for me.

valerie osterhoudt

Michael, I think these buyers that don't act on their best interest are afraid of the answer they will get from a lender. Most of the time these people can't qualify for anything.

valerie osterhoudt

Mark.. We need some sort of guide line when it comes to what buyers qualify for. There is no way I will show a $500k home to a first time home buyer that only makes $45k a year. You know what I mean?

valerie osterhoudt

Jane.. You are right. It is a waste of time for everyone.. the buyer, seller, seller's agent and of course the buyer's agent. Oh, buyer's agent! If we represent the buyer and are trying to educate them on the process of buying a home and don't listen, why would we want to waste any more time?

valerie osterhoudt

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