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Realtors, do your job........

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How do you handle your client when they come to you with a lender already? Do you ignore the fact? Do you try to ask them questions? Do you know what to ask? Do you call the lender? How do you know if they will be upfront with you. I know many of you have your own favorite loan officer(s) to go to. Should you have a loan officer outside of this so-called circle? Another trusted opinion?

There are many of you as realtors that know some of the basics. Lenn Harley has a knack what to look for. She knows the difference between adjustable's vs fix rates. Bryant Tutas knows when there is fraud involved either between the offer sheet or the lender involved. And Randy Prothero knows when he comes across a pre-approval letter that doesn't look right. And I am sorry to have missed many other great realtors, but I wanted to make a short point.

I was contacted by a consumer yesterday who has been reading some of my blogs and needed some help with some questions. I'll keep this consumer nameless for the sake of anonymity. So we'll call this person Ms.PA Buyer. Ms. Pa Buyer had already been qualified by a lender of her choice. She stated that the realtor tried to get her to talk to her loan officer, but she refused because she felt comfortable with her choice. She went on to sign the contracts and settlement is set for August 31st, 2007. So, what should you do? My advice, Ask some basic questions anyhow. Make it your initial interview.

So, after speaking to Ms. Pa Buyer, I found some startling facts, just by asking 10 minutes worth of questions. Let's move onto those basic questions......

Have you been pre-qualified or pre-approved? Where you given a letter?
What kind of payment were you given? Was it broad (a range) or precise? The same thing for the rate.
Did the loan officer give you a good faith estimate to show your payment and costs?
Do you have any cash to work with?

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Let's review Ms. Pa Buyer's answers........ (the answers will be in order of the same questions from above)

-- Yes, the loan officer said I was approved. Me : So, did they give you a letter? No. Did they take an application and collect pay stubs and bank statements? Client : They gathered my paperwork but never took a loan application. Me : Then you weren't approved, but maybe qualified. And then go on to explain the difference between the two. (Please read below for this example)

-- I was given a range from $1,200 to $1,300. And she gave me an approximate rate from 6.875% to 7.500%. Me : This doesn't sound right. That's a large range, especially for the rates offered. After using the lowest rate of 6.875% and adding the taxes, homeowners, and mortgage insurance; the payment was around $1,325. This is way off in my opinion. For help with calculating payments : Mortgage payment calculator

-- No, she didn't. But after Ms. Pa Buyer spoke to me, she called the loan officer and said that she would send it to the realtor. (the loan officer never offered the GFE - good faith estimate) She was qualified 2 weeks ago and the offer was accepted 1 week ago. Overall, what's wrong with this picture?

-- Not much and I was told that I need 3% of my own funds and that the seller could give 3%. Well, that doesn't sound like much to cover a 2 1/4% down payment and all other costs. Did the loan officer tell you that you would need some additional monies? That is why the good faith estimate is very important.

And keep in mind that income and credit is a key. But just these general questions can be cause of concern sometimes.

**** Having someone else other than those within you circle is always key. Someone trusting and knowledgeable. Becoming a team. ****

red flag

Now the question becomes, do we have a problem? Just for the fact that 1 or 2 out of 4 don't sound right, this should throw up a red flag. Especially in regards to the fact that this lender said that Ms. Pa Buyer was approved, but never took an application. And that Ms. Pa Buyer was never given a good faith estimate. My job is to provide the GFE (good faith estimate) and to address any issues or concerns that the buyer might not know to ask. In my opinion, you have a lender or loan officer that is trying to hide something.

I offer my services all of the time. Even if you have My (your) Favorite Martian, I mean, your favorite loan officer..... I am here to help. It's not about the business, but the relationship. And sometimes it doesn't hurt to get someone else's opinion. In 10 minutes or so, I could question the loan officer and possibly make a quick determination. Talking from one loan officer to another, able to speak their language. I can always be reached right here. Just don't be afraid to ask some questions in your initial interview.

For more detailed information based on what was mentioned above, please read the following :

First Time Homebuyer Tips -- FHA - Conventional - VA - Subprime -- Part 1 of 4

Mortgage Shopping -- Rate vs Payment......

The difference between a Pre-Approval and a Pre-Qualification letter.

Shoppers that shop themselves right out of the market……

Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 07/31/2007 07:58 AM

Comments (29)

realtor, mortgage, bad credit, pre qualification, pre approval, buyer, settlement, loan closing

This post has been included in New Jersey Information Camden County, NJ Information Cherry Hill, NJ Information

29 Comments on Realtors, do your job........

JUL

2007

It scares me just how often I run across people who have not received a GFE. I mention it to them and tell them what it is and it is like it goes out the other side. Then, the closing and, well, not always pretty.

Thanks for the confirmation of the correct questions to ask. I am glad that I am at least in the correct ballpark

Jeff,

You know, just as well as I do, the reason these brokers don't properly qualify these clients, is because they don't know how too!! they don't know what they are doing, and there trying to get any deal, it's like those boiler rooms, with the just get them in the door attitude, as for agents they should be totally cautious, but it's still our job in the end..I did notice one other thing, I have had people come in to me from an agent and when I qualified them, I was told it's not enough, they need more and they took them elsewhere, I don't feel the need to get into trouble..

Nicely done, this has been a issue of mine, many times in the past with agent friends of mine.

Tom Weiss

Great points Jeff, I have helped people in the past who were getting a great offer from their lender, my realtor partners send them my way, I offer to look at their offer and if it's a solid offer and they are happy with the service they are getting then I wish them luck and let them know that I am here if they have any questions along the way. This builds goodwill and helps your realtor partners feel better knwing their buyer has a solid mortgage deal.

Excellent post. Thanks for the info. I run across many who don't have a GFE. maybe the loan officer has tem sign a copy of something but they never get it or don't realize what it is. A good lender is key to transaction. And, yes, a good agent will know how to work WITH the lender/loan officer.

Jeff,

Great Post. Can you post some follow up questions to the "I'm qualified through the Lending Tree" or other online mortgage "approvals"?

thanks,

Dave

Jeff:

Good Post. You made some real good points.

Excellent post Jeff! When I get a client that comes in with an out of town lender I make it my first priority to speak to the lender. I need to know several things. One is whether this preapproval seems unrealistically high. It may not be my place, but I want to make sure that my future homeowner will be comfortable with their payments. Another is what the interest rate is, and whether any points will be charged to achieve it. The third is how long is the lock for...we don't want to write an offer that is three months out there if the lender has them locked for 30 days.

Laura.... that is my biggest pet peeve after being in this business for almost 15 years. And I don't care if you are a new loan officer in the business. You know better. But they will blame it on the consumer, making it sound like they should ask. If they don't, volunteer it. Overall, my pleasure and thanks for stopping by.

Tom W. ..... this is actually a 2 part thing. The loan officer either doesn't know what they are doing and just trying to bring in any loan..... OR... they want to give the least amount of information possible. It makes it harder for the consumer to shop. Hey, some of these people aren't dummies. Don't give some of these loan officers too much credit. Thanks for the polite compliments.

Leo...... some great points. It can build for a better partnership, especially if you can confirm that it's a good deal. Showing that you don't want to interfere with the deal, just to get business. Thanks for the kind words.

Gary.... that's another sad topic. That the lender gets the client to sign a good faith estimate, but never gives them a copy. How sad.... and I have come across this more than enough times. Thanks for the compliment.

Dave..... Dave, I certainly can. I can even e-mail you later with some of those that you requested. Thanks for stopping by and for the kind words.

Bill.... thank you very much for the comment and for stopping by.

Chris.... and if I was that out of town lender, I have no problem with the realtor calling me. I actually tell them that even if the other agent or the seller ever wants to call me, just for confirmation, to give them my numbers. I believe in keeping everyone in the loop.

You do bring a good point up in regards to the lock. Personally, I wouldn't get too carried away with the rate and points. This can be dangerous for many reasons. You have credit scores and credit involved. My point was that this loan officer gave such a wide range when it came to both payment and rate. I think this is even more important. It shows inconsistency. Again, my personal feelings about asking directly about the rate and points... and how the market fluctuates and because of credit and programs.... this might be going to far.

But that;s my opinion and I will let the realtor asking me know this..... but thanks for your input and for the compliment.

These are all really great questions to ask, Jeff. Seems to me that this is indeed part of our job...making sure our clients aren't taken advantage of.

Even though a lot of us delegate the entire financial process to a trusted loan officer, it is crucial to be extremely knowledgeable about tho process - that inlcudes knowing what questions to ask and what programs each lenderpartner may have that would work fora specific client.

Jeff, I think this is one my favorites of your posts. All excellent points. I give my buyers the obligatory 3 mortgage brokers to call. 2 of them are regulars for me. The 3rd varies- that's my opening for other options =). And according to our contracts, if the buyer had not yet received some type of approval letter, they would be in violation of their contract. We fill in the blanks with how many days they have to apply, and how many days they have to obtain approval. Plus, it's the law that they get a good faith estimate within 24 hours of application, but I guess they didn't really apply, did they?

Oh! And I'm also subscribed to both Broker Bryant and Randy Prothero, so I've seen the posts you mentioned. BB sure does get his share of fraudulent offers!

Lisa Hill

I don't know how people are accepting offers without a pre-approval. It is kind of key to knowing the transaction is going to happen. Great post, definitely a 5! If only there was a formula that everyone had to follow! But I guess that wouldn't be very American now would it.

Another 5 stars to Jeff. VERY good reminders to us out there. Buyers who come in with their lenders in place can be very defensive. It's important for us to reach beyond that somehow, to get answers to those questions you raised. Then, we have to hope they realize they don't have what they need - they certainly don't want to hear it from the agents.

Lots of great info Jeff, just wanted to to sneak in and say hi. This kind of information is something that the consumer should all plug in to. I don't think a lot of consumers actually have a "relationship" with their lenders, unless they have done business before. I think we should be more pro-active in that regard.

Great info Jeff! Her LO is not doing her any justice, and is giving the rest of us a bad name. I like your 4 simple questions you asked her/

John C. ........ it's not so much making sure that the client is not taken advantage of, but that the loan officer did his or her job in qualifying. I think we need to worry more about this than just the fact that they got a great deal. thanks for your input.

Patricia...... in all honesty, I think it would be too much for that realtor to try and know different programs. Leave that to the professionals. I am not trying to sound mean here. But I really think that realtors should stick to the basics that were outlined above. Getting more involved can make it more confusing for all parties involved. It's bad enough that there are loan officers that don't know what they are doing.

Lisa..... wow, thank you very much, I appreciate that. I think giving a few lenders as referrals is good. I'll admit, since I know what I am doing, I would rather be the only one. But the realtor is just protecting themselves. Thanks for the feedback and for those kind words.

Jonathan.... what's sad is that so many pre-quals & pre-approvals aren't worth the paper that they are written on. My example above is a classic. Not only did the credit not fit FHA's guidelines, but the ratio was much higher. It's just not going to happen under regular FHA guidelines, unless that company doesn't care about their FHA license. Thanks for the kudos....

Margaret..... I am sure it is very hard for the realtor to handle this without pushing the client away. Some consumers just think they know it and how it works and will go to someone else that they can control. But in all honesty, is that someone that we really want to work with? Aren't they coming to us because we are the professionals. Thanks for those polite compliments.

Laura..... I would agree that the consumer doesn't have a relationship right away with the lender. That is where a realtor can step in and help make that bond happen sometimes. Thanks for the comments and for stopping by.

Pete..... no, not at all... and there is more to this story. After speaking to Ms. Pa Buyer, she is going to continue with this loan officer and take her chances. I told her that she might ruin a few more lives depending on how bad the seller needs to sell their house and depending on what other sellers and buyers are involved. Her back was up against the wall, that she didn't seem to care and will move forward with this company.

Hey, I am not god nor perfect, but I don't see this loan happening. And just think all of the people that will be involved. Thanks...

Jeff, a 5 from me! Educating the consumer to ask all the right questions, know what to look for and what to expect is important. However, as loan officers it IS OUR JOB to make sure we do it and do it right!

Jeff, I rated this a 5, I think it is exellent information. Yes, we try to get our buyers to work with our lenders. But, those that don't we insist on a pre-approval letter with conditions and seeing their GFE.

Good post Jeff -particularly the questions you asked. Three small points if I may -first in response to Chris.

Hi Chris:

When I get a client that comes in with an out of town lender I make it my first priority to speak to the lender.

That is always a good thing to do.

I need to know several things. One is whether this preapproval seems unrealistically high. It may not be my place, but I want to make sure that my future homeowner will be comfortable with their payments.

It is important to make sure that a pre-approval is done right so that you do not show the buyers properties they cannot buy. I am always happy to go over a pre-approval with realtors I work with so that they know how I arrived at what I did -as it tends most of the time to be lower than what other loan officers will give them.

Another is what the interest rate is, and whether any points will be charged to achieve it. The third is how long is the lock for...we don't want to write an offer that is three months out there if the lender has them locked for 30 days.

The question about the lock is a good one if there is a lock of course because you need to know the time frame within what you are working.{1} Beyond that though, I concur with Jeff about the rate and points issue. I will probably spell out in detail tomorrow or the next day the various problems I have with Realtors involving themselves too much in the nuts and bolts of broker transactions but that is all I will say on it for now.

Hi Jonathan:

I don't know how people are accepting offers without a pre-approval.

That makes at least two of us because I do not know either.

Hi Thomas:

You wrote that to Jeff but I agree with you -I have seen this a number of times over the years. In fact, I had an example a couple months ago where the person told me they were "qualified for 185,000" and when I ran the numbers, I could not quite get them to 115k. In our market, 115k will not buy you four walls and a roof -they would really have to go to the outskirts about an hour and a half north of the metropolitan Seattle/Bellevue (about an hour or more east and about two hours south) to find anything that cheap. I do not know how the other person who "qualified" them ran their numbers{2} but however it was done, it was significantly off base.

I did notice one other thing, I have had people come in to me from an agent and when I qualified them, I was told it's not enough, they need more and they took them elsewhere, I don't feel the need to get into trouble..

Very wise. Better to service existing clients and market past ones{3} than messing with those kinds of potential powder kegs.

Notes:

{1} I am not going to go into lock extensions here.

{2} If there even was one: sometimes buyers say someone did when in fact they are going off of some relative or friend's "educated guess" or perhaps their agent's or their own.

{3} That happens to be the theme of a post I wrote yesterday actually.

Hi Jeff, I have two lenders that I work with consistently. I prefer to have clients use one of these lenders since I know for a fact that they will be taken great care of and they are viable buyers. If a consumer comes to me with their own lender, I ask to see their pre-approval letter and then I get on the phone with the lender for the initial interview.

Based on my conversation with a lender, if any red flags go off, I respectfully ask the consumer to double app with one of my lenders. This way the consumer gets a second opinion, becomes more educated and possibly gets more information on different products. I, on the other hand, get to sleep at night knowing that my client is taken care of.

Kim.... well, we could educate clients to ask the right questions, but this was about the realtor asking some questions. And not just accepting the fact that the lender that they picked did an adequate job. I use that last word loosely. lol And thanks for the compliment.

Missy..... that's good that you ask them for the GFE. Wait, you know what a GFE is? ;o) A pre-approval letter is always good. But sometimes these don't mean much either, which can be scary.

Now, I am not asking a realtor to fully qualify a client. Keeping it simple and just asking the basic questions can throw read flags. Thanks for your input and for the compliment.

Shawn...... wow, a book here. ;o) Now, I am slightly confused. You are a lender, right? Why would you need for yourself to talk to a lender if the consumer has a lender from out of state? What is the difference if they were in state? Seriously..... As a lender, I asked those basic questions above and I didn't need to talk to the lender. I already knew. So, I am slightly confused.

In any case.... thanks for your feedback and input. I am going to swing over and check out your most recent post. Thanks for stopping by.

Irina... that's great, not only having two lenders, but how you get on the phone with the lender as your initial interview. Good for you. It's shocking, I don't get too many realtors that call me to talk to me. In my area, many realtors know my name. But even outside that, it doesn't happen much. I usually, 75% of the time get on the phone with that realtor to introduce myself. I think that makes them feel comfortable.

Thanks for sharing this....

Hi Jeff:

Now, I am slightly confused. You are a lender, right?

I am a mortgage banker/broker yes.

Why would you need for yourself to talk to a lender if the consumer has a lender from out of state?

I just reviewed my thread above and it could give that impression in how it was phrased (darn multitasking) but that is now what I was saying. I was merely saying that Chris' talking with the out of town lender of a client of hers is a wise move. I believe lenders and realtors often do not communicate enough -I have some stories of problems on both sides from this and I am sure you have seen many examples yourself.

Shawn.... got ya. That makes more sense now.... ;o) Thanks for the clarification. Or in this case, communication. ;o)

I went through these questions with a potential buyer yesterday to find he thought he was pre-approved for a VA loan. The lender he spoke with does not do VA loans. 1st red flag. No approval letter, 2nd red flag. No good faith estimate 3rd red flag. The loan officer did not collect needed docs, that was not an approval. It was a loan officer I had never heard of. Well there are more loan officers than locusts, so maybe that was not a red flag. LOL

Great post Jeff, we need to keep everyone on their guard. After all this is big money for the buyers.

AUG

2007

I went through those questions just a few weeks ago and saved myself a tank of gas and a day of wasted shopping. The buyer was not prepared for the over all cost of home ownership.

The consumer didn't know much about home loans, that was obvious.

That LO was very irresponsible in the pmt ranges. I especially like the GFEs I see with strangely low taxes and insurance numbers.

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