Jason, No I think you did everything you could. I guess if I was to do it any differently, I would have first called Alex, then set up a conference call with the borrower or arrange that everyone got together at your office.  Then I'd have broken the bad news about qualifying for $50k less.  This would allow Alex the opportunity to respond to the expectations that were not met, and you might be still working with this borrower.  But being honest with someone is NEVER a bad policy.  I've done something similar and understand your frustration.  Sometimes it just comes down to the way the information is imparted.  

What would I have done?

I have and would have done nothing different.  That scenario was done exactly as it should be - honestly.  I do some foreclosure bailout either pro bono or not much above that and I'm always upfront and honest with everything.

I tell them I will do everything I can, and something I didn't even know could be done, but I won't do anything I shouldn't.

And no one should.

Good for you Jason.

Ooh, Kumquat - haven't seen that in a while. :)

Karl,

I am sure that once the realization sets in the borrower will come back to the table... I just think that it is a bit childish to just ignore those that ere trying to help him.  I am also afraid that the borrower will go back to the person that promised him the stars, and cause him to loose his first house within the first year of ownership.

Christopher,

I was shocked when I heard 6% seller concession on top of the down payment assistance.  Makes me wonder how much the broker was really going to charge.  I already offerred to do the deal for next to nothing to keep cost low, put more money towards down payment, and not ask so much from the seller.  I am glad that others don't led greed get in the way when they see a problem file.

Kumquat... I havn't seen that for a while either (I got strawberry).  I wonder if they will change it to veggies one day just to stir things up.

Happens to the best of us we try to follow the instructions of the client and even listening well doesn't help if they don't give you the information upfront.

Great you have Knightlines Mortgage on your side and good job! A pre-qual has not much to do with a full Loan commitment as you know.Very interesting blog.Some will just boost up the reality and its a shame.

Sometimes it's so difficult for us realtors when someone is promised a particular type of loan from a lender.  Only to find out that they had not submitted all the necessary documentations needed.  You are right, honesty is the best policy.  The proof is certainly in the pudding Jason.  Good post as usual.

You did everything right-

People are just so used to being lied to that they go into shock when they are hit with the truth.

At some point I think a post on the difference between 'Prequalified' and 'Preapproved' my be in order.  I think that would go a long way in helping both customers and potential customers get a better understanding of what they can expect from us as MBs and why we ask so many questions.  :)

Unless there already is one, I'll start one over the weekend.

And I recognize that there are differences in every state, but here in Florida I hear both words used interchangeably.  And then the next Realtor is firm on there being a difference. 

What I tell my Realtors is this; I can get your client preapproved virtually the same day.  Some will say they can do it in a hour or less, but that depends on the time of day, the resources and on and on.  I say the same day.  However, prequalified is actual research into their credit, an interview (over the phone is fine) and some background on their work history and so on. 

Prequalified tells them exactly what they could be looking at on X house.  Preapproved tells them how much house they can afford.

Again, I know this is up to interpretation but I would very much like to know how other MBs handle this.  And if anyone thinks this is going off topic, I understand and I will start a new entry - but I see this as the initial challenge in Jason's issue; the original lender got the client all excited with a generous preapproval - but Jason is showing him what he's actually qualified to buy.

Again, good for you Jason.

Oh wow, Tomato.  I've never had Tomato.  Cool!  :)

Jason, you did everything right; it sounds like the usual scenario where the consumer goes looking for a house before they are pre approved and then get their hopes up only to have them dashed. A courtesy call would be nice though no? I suppose they could be thinking things over and you might still hear from them

I'm sure that Alexander understands, it sounds like the buyer had been set up with unreasonable expectations...

Seems to me you did the right thing. After all, the client asked about a particular amount rather than finding out the absolute best he could qualify for. But depending on the market he might still be able to get the house if the pricing is right (or the home is now overpriced) and the sellers really want to sell.

And better to find out the truth now, rather than after you get the home under contract and in the final analysis don't get approved.

Christopher- check out Pre-qual vs. Pre-approval.

"People are just so used to being lied to that they go into shock when they are hit with the truth."

I agree, and it is very tough for your average consumer to sort the truth from fiction at times.

Jason, You did right. Unfortunately what will happen is he will go back to the other guy and get a worthless Pre-qual letter and then tie up some unsuspecting Seller's property for several months. Then the deal will kick. Been there done that.

Shucks, Not to worry.  Not everyone will go to settlement.  We have buyers who qualify for $X but they only want their payment to be $X which means there are no homes available.  We have buyers who WOULD have qualified for what they want IF they hadn't bought that car last month.  We have buyers who must have 4 bedrooms and 2 full baths and a 2 car garage but only want a monthly payment of $X which doesn't exist in this market.  

Sometimes it just doesn't work.  You learn to move on.

Lenn  

I want it all too.  The difference with me and your customer is that sometimes it's just not feesible. 

Wish him luck and bid him adieu.  That's all you can really do with customers like that.

Wow... I step out for a couple hours to get some work done, and this happens.  I guess I need to work some more.

Teri - How does the saying go... "NO good deed goes unpunished."

Llyod - I offered to give a preapproval, but it was contingent on getting at least some information that was given proven.  (IE Pay stubs)...  I am could have run it through DU to get the preapproval/approval, but it could have changed once I verified the income situation, which is the biggest part of getting the loan done (down payment assistance v. 100% financing).

Netta - What amazes me the most is the other broker who was supposedly given the documentation still qualified them for more than what they were wanting to pay.  If the client wants to pay $y, base the loan on that figure.  Then you throw in the fact that they did not even think about d.p.a not being available because of the change in job status.  If they get d.p.a, they can get more of a home.  If the don't, less of a home.

Marc - Thanks... yes, the truth can hurt sometimes, but I would rather be hurt by truth than by reality of loosing a house to foreclosure.

Chris - I qualified the client based on the information that was verbally provided to me directly by the client.  I could have gotten the pre-approval if he would have just faxed over the pay stubs and the letter from d.p.a.  Plus, the client has still not signed the application or completed my online application.  I am not going to submit anything to a lender (to get the pre-approval/approval) unless I have a signed application were they have attested that the information they have given is true and accurate to the best of their knowledge.  There is no way I am going to take the blame when they lie to me.  I do agree that there is a big difference, where the pre-approval is more powerful than the pre-qualification.  And yes, there are a couple posts already about pre-qual v. pre-approval.

Carol - The previous broker had pre-qualified the borrower for a certain range.  The problem was that the broker did not listen to the client's wants of what they were willing to pay and qualified for what they could have possibly paid.  In a case like this, I am glad that the borrower wants to pay less than what they actually qualify for.  They want to be safe with their money and not extend themselves (as is they are/were considered low income).  They may be back, but I am afraid that they will go with the other broker now just to get the house they want even if it will be out of the range that they want to pay.

Angus - I agree.  The other broker if I am doing my math correctly was qualifying at just PI, and not PITI.  The clients wanted PITI to be $y.  Just a sneaky way for the broker to make more of a commission.  Plus the 6% concession on top of d.p.a.

Jeff - I am sure that if the borrower is willing to cooperate and return some calls, we could get him such a deal.  I am seeing a lot of home right now sell for less then what they may actaully be worth.  There is one down the street for me selling for almost $100,000 less than the appraised value because the sellers need to get out from under the mortgage.  (Sorry, investors... already under contract from what I hear)

Mikey - Is this the same Mikey that had the debate with Jeff B and Brian Brady earlier this week?  You seem to frequent the site quite a bit.  You really should join and become a member.  Anyways, yes... it is a shame that in our industry people get lied to quite a bit and then seem more upset when the truth is told them.  You would figure it to be the other way.  Happy to hear the truth for a change.

Bryant - Here is the funny thing... we were thinking about taking him shopping in your neck of the woods.  That is about the value of home that he could afford.  And yes, you are probably right that he will go back to the broker that will give him the figure that he wants to hear and not be able to close, or will close and loose the house when he can no longer make the payments.

Lenn - He did qualify for a home that was realistic in value.  The problem was that the drop in price might not necessarily change the quality of home, but rather the location.  He can still get a decetn home for that price range.  Everything can still work for him, he jsut has to realize that the neighborhood will change (and no it is not a bad neighborhood, ask Bryant)

Ann - I will keep trying because this was also Alex's client.  I do not want him to loose a client because I put the truth into him.

Checking in (good way of putting that) and reading this discussion. :)

Hey. At least I let you know I am here. :)

TLW...ROAR!

Jason,  You can't tell em what they want to hear you must tell them what they must hear... 

Jason, you did the right thing!  Truth must be spoken. So many "possible clients" have heard information that has inflated their egos.  When they are like that, it's hard for them to come down!  Some of the ones who have just barely qualified for a loan have taken off on a "tripping journey" with expectations of buying the Sears Tower!!!  These are the ones who just got a toe in the door, and now they want to pry it open to make room for their WHOLE BODY!!!

If i sound a little sarcastic or negative....KNOW that it's just my E X P E R I E N C E speaking!  Stick to "whatcha" know...quit second guessing......and realize that Alexander is a professional who understands - and so are we!  I'm PROUD of ya!     

Many clients do not want to hear what they need to hear but it is still our job to tell them. Honesty is the way to go... usually when they wake up and smell the coffee they come back or refer a friend.

Joanne - thanks... now if we can just spread that around to all the others out there in the field, so we don't have situations like this popping up.

TLW - thanks for checking in... I was wondering where you have been.  Madison is having her 1 year birthday next Saturday. :)

Diane - no you don't sound sarcastic.  I fully understand what you are saying.  It irritates me that the bad guys do what they, then us good guys come in and tell the truth.  It makes us look sometimes like we don't know what we are doing.  (Why are you qualifying me for so much less than what this other guy is qualifying me for?  You must not know what you are doing?)  They never look at the other way... wow, thanks for telling me this.  I could have lost my home becuase I could not afford those payments for too long, or I could have lost my deposit if I backed out of the contract when I saw what my real payments would have been. 

Lillianne,

Thanks for stopping by... I see that you may not be a member.  If this is the case, I welcome you to join.  Perhaps I need to send one of the codgers over with a cup of coffee to make them wake up.  :) I hope this inspired you to look up Jay and Ambrose to see what I am talking about.  Honesty if the best policy.

TLW - thanks... I will have to print that out and put it in Maddy's scrapbook.

Jason.... late to the party.... but as said before, nothing else that you could have done.

Jeff, where have you been hiding.  Thanks for stopping by.  I just put up another post about golf, marketing, etc.  I think you might enjoy it... plus, I mentioned you.

Jason - IMHO you did exactly the right thing - and likely saved yourself some time and effort by not getting any further with the process just to have the buyer balk at the 11th hour.  Stick to your guns!

Tony,

Thanks... I don't think that these buyers would be that difficult to deal with, but that other broker spoiled them with false hopes.

Jason, don't beat yourself up.  You have saved everyone involved a lot of needless time and aggravation.  Hopefully the buyer will come back around as soon as they get a grip on reality.

Stefan, thanks... not beating myself up.  Just showing that those bad apples out there make it difficult for the rest of us.  The being at fault question was more of a rhetorical one.  Even though I did right, it was not what the client wanted to hear after he had been told something else.  The real person at fault is the original broker that created false hopes.

You did everything right.  I wouldn't have wanted my mortgage girl to fill them with lots of smoke only to find out later (like right before or even at the closing table) that their eyes were bigger than their stomachs.  The truth does hurt, but smart people turn that knowledge into something useful.  I guess those people just weren't ready...to buy that house they wanted or to hear the truth.

Jim & Maria,

Thanks for stopping by.  I am sure that the borrower just needs time to absorb the truth.  It is a lot to swallow when things are no longer what they seem.