Why does your seller need a mortgage pre-qualification?

By
Real Estate Agent with Douglas Elliman Real Estate

Imagine... you list a house for sale and start marketing it. While talking to your seller you learn that they purchased the home is 2003, have very little equity and will just break even on the sale.  You also learn that since purchasing the home, they have taken out loans on two cars, accumulated quite a bit of credit card debt and had a baby so the wife is now working part-time, off the books.  In addition, their credit took a big hit when the husband was out of work for nine months in 2007.

Since they are expecting baby number two, they would like to move to a less expensive neighborhood and get a larger home for around the same price.  They have even budgeted for the same monthly mortgage payment.  Sounds like a good plan right?  Wrong.

You have done a great job pricing and marketing their home and they are in full contract in less than a month.  They find a house they love and feel they can afford.  Except, based on their new debt to income ratio and lower credit score, they cannot get approved for the new mortgage they want.  They end up buying a smaller, less expensive home in their second choice neighborhood.  And of course, they blame you.  If they had gotten pre-qualified for a mortgage before listing their home for sale, they may have waited until their credit had improved or the wife went back to work full-time.  They may have even decided to not sell their home at all. 

Yes, you earned a commission on the sale.  However, will these clients refer you or will they bad-mouth you to everyone they know?  By getting pre-qualified for a mortgage before selling, they know exactly what they will be able to afford and exactly how much they need to walk away with after selling their home.  Suggest that your sellers consult a mortgage broker before selling and it could save them from a rude awakening later or solidify their decision to sell.  It also shows that you care about their end result and not just your paycheck. 

Comments (3)

Patricia Aulson
BERKSHIRE HATHAWAY HOME SERVICES Verani Realty NH Real Estate - Exeter, NH
Realtor - Portsmouth NH Homes-Hampton NH Homes

Great informative post today. Thanks for getting it out to us today on AR.  It's appreciated.

Patricia /Seacoast NH & Me 

 

Oct 25, 2010 03:51 AM
Katy Cardinale
Douglas Elliman Real Estate - Northport, NY

Hopefully, you have a relationship with a great mortgage broker that can make the process as stress-free as possible.  And yes, its unfortunate that we often get blamed for things out of our control.  I try to educate my clients as much as possible so they are part of the process.  Then when things come up, we can work on them together.

Oct 25, 2010 03:52 AM
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

Oh, absolutely Katy. ANY buyer of a home that's not all cash needs to get the money part handled first. Our (AZ) loan approval forms address whether the seller has to sell another home to qualify, too. And with that, the issue of what if any funds they will bring from the sale to apply to the purchase will be addressed.

I love the saying "Lack of planning on your part does not constitute a crisis on my part." It applies here for sure!

Oct 25, 2010 03:52 AM