Mark,  In a perfect world I would agree.  Many buyers are reluctant to share that info early in the buying cycle,

Mark,

Previewing is a job that an agent that wants to be knowledgable on their market should be doing ... I hope you are not limping previewers into this group.  Personally, I never take out a buyer that is not pre-qualified ... it is not smart business.

Bill- I disagree. My team made a mistake. Which is a direct reflection on me.The buyer didn't find the home that they were coming to Florida to purchase. We failed period. But, let's look at why, the necessary time was not taken with the client prior to setting out and looking for homes.

You make a good point, Many buyers are reluctant to share that info early in the buying cycle. But, we as professional cannot assume that the proper information was given to them. The right questions were not asked. If you work out what the payment is, at lets say $250,000 with PITI&P, you will get any objections right then and there. That is part of my initial buyers interview when I go over agency and the exclusive buyer/broker agreement. It is important to start from the very begining what both side should expect from the relationship. We work on commission, not hourly. Both sides have to trust each other in a fiduciary relationship.

Have a great 2008! 

Allen- No, not previewing. That is due diligence. I am talking about losing a buyer because you are showing too much property. Then their pride won't correct you, and you are left scratching your head saying where did they go?

I don't believe its an "ethical obligation".  I have marched sellers through listings to show them what they are up against in todays market.  We had no intention of buying, we were looking.  Thats an inconvience of having a property listed. 

Ever had a curious looker in an open house?  As soon as you know they are not interested, did you throw them out? 

I agree with leaving the house the way we found it, and escorting the buyer through the house. The card thing I will say OK so not to provoke a debate on cards again. 

As far as the total payment, thats on the lender to factor all that in.  I am not the expert on the financing side so if it don't work, I show another house.  I am my car salesman's dream client.  The last 2 trucks he sold me was via email.  I told him what I was looking for, ny terms, and my max payment.  It was his job to locate what I wanted.  I showed up and test drove them, selected one and signed the paperwork.  It was painless.  Did I get the best deal?  Likely not, but I walked away happy as a customer. 

Great Advice. When we bought our last home we were pre-approved for some outrageous amount and knew that there was no way were wanted to afford a house that expensive, if we were first-time home buyers we would have trusted what everyone was telling us and bought a much bigger house than we needed. -cem

Chad- If it's your home, would you want just anyone in your private residence? Probably not.

As far as the payment calculations, You would put your income and livelihood in the hands of someone else when you could buy a calculator for $65 and show your client what the monthly payment will be in their families budget. And make sure that you are showing the right homes. I don't trust anyone with my clients purchase. That's kind of how we got into the mess we are in now with short sales and foreclosures. I feel it's my responsibility that I find the right home for their budget.

Chad, have a Great New Year. 

Chris- I think we have an obligation to create customers for life. Have a safe and happy New Year.

Great Blog!!!!Kudos on this one. It's so important to know what your buyers have in mind as a monthly payment, it often time means much more then the actual price of the home.

Mark, I have always used the "what do you want to pay per month" approach when speaking with buyers. I tell them to find out what they can qualify for and then I tell them to have their lender give them the purchase price of what they want to pay per month - usually two very different figures - good luck :)

Heather- It comes down to afford ability. I feel that we have an obligation to buyers to help them with the largest purchase that they will probably make in their lifetime.

Jo- It's all about asking questions and filling the need isn't it. 

Absolutely.  Sellers are not opening their homes for guided tours for decorating.  An agent has a duty to only show homes that the agent is qualified to buy. 

Agreed.

I just knew Lenn would be here backing you up.  I don't even know why any agent would put an unqualified buyer in their car.

I got the cupu-assu graphic again...*teehee*

I agree to make sure they buyer is in his price range and to take them out only after prequalifying them.  Because of the personal nature of money, I try to stay out of it and let the lender of their choice give me a target number to work with.  That seems to make them feel a little more at ease and I don't like I am prying.

Lenn- I think it's our duty to only show homes to qualified buyer. We are in agreement. Happy New Year!

Chris- Thats funny. I don't understand why agents waste everyones time. In the case above, we were just following the wishes of the client. They were approved. But, approved for too much.

Latonia- In my blog, we did this and it blew up in our faces. It's a good idea just to check the numbers before you proceed. It's not the lenders commission. It's yours!!

Mark,  Totally agree with what you've said.  Chris keeps on getting that cupu-assu and keep on getting naranjilla

Marc- I hope you have a great New Year! I haven't been bless with cupu-assu. I just guess I'll have to go to Brazil to get it.

Well, good post, and I agree.

A mortgage professional who is issuing a pre approval should go over this with the potential client in detail, as well as go over it with the Realtor. 

I recently worked with two Realtors, who I had never met before, and they questioned, in great detail, my pre qualification.  I was not concerned with their questions, since, just because of this very scenario, why a pre qualification is so important.

Since I had done all the preparation, in great detail to qualify the borrowers, and make sure they knew payments, and funds to close, I knew the price range they were comfortable with, and again, shared this with the Realtors.

In the end, two happy Realtors, and a new homeowner.

Please have a great 2008!

Excellent post! You should be commended for sharing a mistake. I get to the monthly payment very early in any relationship. It saves everyone time and is professional. Why would you want to show people houses they can't qualify for? I tell my people that anything they tell me is confidential. I did not even share information with my wife when I was selling her secretaries home!

Michael- That is the perfect scenario.The buyers showed up with a   pre qual letter from New York last Saturday ready to go. We didn't know the lender nor could we call on a Saturday. The new home builder did a check and they were solid. I just wish we had done a better initial interview. Have a Great New Year.

Wayne- The mistake will not happen again. This is a lesson we all can learn from. I shared it because I am an instructor in my spare time. They did qualify for the home. They just didn't realize what the payment would be and didn't want to make that large of a payment on a second home. Confidentiality is essential  in all Real Estate matters. Have a Great New Year. 

I have never viewed from that perspective before Mark, thanks for bringing it up.  I have always placed emphasis on qualifying buyers as a good business practice for myself and for my buyers, but never really thought of it from the seller's perspective.  Of course, it's not always easy to get buyers to be upfront, but you're right in that it doesn't alleviate our obligations to do our job.

Trent- It's easy, just put yourself in the sellers shoes. As a Realtor we have an obligation to all parties in a sales transaction as long as it doesn't violate our fiduciary obligations of our principle, or our ethics. Have a great New Year!

I think it says alot about you that you took the resposibility of them not finding a home. You make a valid point about the payment too. This also gave me an idea for another blog too! :)

Mark:

After learning what my clients are looking for, I ask them three questions to pre-qualify them. What is your price range more or less, what kind of monthly payment you would be comfortable with including property taxes, insurance and monthly home owners fees if it applies, and what kind of a down-payment are you thinking of investing. Some people show up unexpectedly in your Real Estate office and if they have not been pre-qualified you can't just dismiss them. Your lender will teach you the very simple rules to follow to match the answers your client or walk-in gives you and see if they are making sense.

Isaac Bensussen-www.besthomesinlajolla.com 

Pam- I am glad that I have inspired you. I am my team. We all prosper, or we all fail. Together. The client isn't happy about having to come back to find there 2nd home. I just hope we get a second bite at the apple. Have a safe and happy New Year.

Isaac- Those are the key questions. I miss LaJolla and San Diego. Your in the best place in the world! Have a great New Year!

I have a spreadsheet where we work out what pricing looks like for a monthly payment and that really helps them to start framing their needs better.  No matter what the lender has done I always go to this so that we are on the same page.  Nothing like that shock of hearing this is going to cost how much!

Josette- It's a staple in house hunting with a buyer. Great job!

Mark, sounds like you learned a great lesson with this couple.  You won't forget to ask a potential buyer if they are comfortable with the payment again.   I have clients concerned about rates, closing costs, fees, price, etc.  but it almost always comes down to monthly payment.  Although they may not admit it.

Jimmy- I don't believe that this mistake will be duplicated. Budget and payment are always the deciding factors.

Maybe I am not bold enough but most of my buyers want to look first.

Clark- How do you know what to show them? Here in Kissimmee there are 2000+ homes on the market. I don't have that much time. Nor do my clients.

Excellent post, Mark.  I think it's important for buyers to know what they can afford and what they want to afford.  Just because the lender will give them X, doesn't mean the PITI will fit in their lifestyle or that they know what the PITI is. 

As for going through listings, I agree, it's only for the purpose of showing it for sale.  I have taken sellers through to look at comps, but have always made that clear to the listing agents.  Beyond that, anything less than a ready, willing and able buyer is a waste of time.

I've noticed that, too, that the lender hasn't explained that their house payment will include taxes, insurance, and possible PMI.

Jesse & Kathy- Thank you for taking the time to comment. Making assumptions can cost you a deal, as it did in our case. Have a safe New Year.

Cathy- That's a very good point. I believe that is a large part of why we have so many foreclosures and short sales now. It's time to get back to basics and explain everything.

pre-approval only for me, I need to know what they can afford, before I show them houses they can't.

David- Well said

This is all true - make sure that your buyers are comfortable with the monthly payments before taking them to homes they wish they could afford!

Emily- True and sound advise.

Mark - I agree that a buyer must be pre-approved before looking at property.  It is the lender's responsibility to review the financials and make sure the numbers work.  If in your example the payment was too high, the lender did not do their fiduciary duty and make sure the payment was comfortable for the buyers.  As a lender I always start by asking a client what they feel they can afford to pay monthly.  There is a number I can qualify you for, and there is a number you are comfortable with, These numbers are rarley the same.  In these days of mass exodus from this business it is your duty to contact the lender and find out all the terms of the pre-approval.  Do not be afraid to:

• Ask for references from the lender
• Have they done loans in your state before
• Have assets to close been verified
• What are the Debt-to-Income ratios
• And in today's changing market:
• Are they going full doc or stated
• Anything out of the ordinary about the financing (100%,Grants,Gifts,Time to close)

Buying a home is a very emotional process.  You and the lender should be on the same page to keep the client focused and ready to buy.  You never know the exact relationship of the other parties.  Everybody has a friend or family member that does loans or real estate.

Nate- Very well and thought out post. I thank you for posting these criteria. We are on the same page. My team will not have this problem in the future. Thank You for these comments.

You are absolutley right, I have had the very same experience. Despite questioning that  they were comfortable with the payments they became too hung up on the loan amount.

Definitely get the buyer broker signed. Your suggestion for that is right on. All the best for a good 2008.

Graham- It's all about monthly afford ability isn't it.

Bob & Carolin- That may be another blog all together. At this time I don't know if we have it.

Sorry... didn't read all of the responses...

I have found all too often buyers haven't even considered their monthly payment let alone the cost of utilities, taxes and monthly dues that they may have to pay or even the upfront out of pocket expense of buying a home in the first place.

That is why I feel it is soooooo important to have that initial meeting to discuss what they want -vs- what they can afford. They don't always get those items factored in when they get pre-qualified. It is essential to walk them through the entire process and inform them.

Their dream of the $280,000 house often drops to $200-$220K quickly...

I have reluctantly shown homes (but shown them anyways) closer to the max of a buyers price range, when I know they wanted their payments to be $200 p/mo less than that higher priced home would be, only to have them change their minds about what they can afford, for that "perfect" home.... It is a huge difference to sell someone a home for $236,000 when they initially wanted one for around $185,000....

Sara Lee- The initial meeting needs to be an interview. That is when I find out If they want to work with me, and more importantly, If I want to work with them. The interview needs to discuss what kind of home, and how much home they are comfortable purchasing. Then we set out on the road. I usually take at least an hour in the initial interview. Just trying to slow down, home buying isn't an impulse purchase.

Mark, I learned, rather quickly, to find out how much the buyer can afford for a monthly payment.  I have a buyer now, who qualifies for a loan about $200,000 more than he can actually afford per month.

Roberta- Good job identifying where the budget is. Some buyers don't know that what they qualify for and what they are actually comfortable with may be two different things. Have a safe Holiday!