Should a Realtor Give Financial Advice?

Real Estate Broker/Owner with Criado Realty 0548772

DollarEdited 04/29/2021


As Realtors we wear many hats, including but not limited to helping buyers prepare for the process of home buying, financially and emotionally. Buying a house is a big deal!   That means we pre-qualify them but to what extent do we go?

My Lady (Buyer Story)

I have been working with a highly intelligent but slightly scatter brained Buyer who emailed to me after an exhausting day of home touring:  "Thank you for all your hard work and time to show me homes today. I am sorry but I was offended and felt judged by your financial advice today.  I don't think Realtors should be giving financial advice but should just show me homes. I know you said your time is valuable but its your job to show me homes that I want to see. Since you're too busy to do that I'll have to look for another Realtor.  I appreciate all that you have done for me up to now and will contact you if I decide on one of the many homes you showed me." 

I can't say that I was surprised, I had already come to the conclusion during our time together she didn't understand that this is a financial decision and if she's not going to qualify for a home then there's no point in home shopping.  I was surprised that an articulate, sharp-minded retired MD would think this way especially since I met her via an 8 hour home buying class that brings in pros includig lenders and real estate agents such as myself. 

I had told her that her debt was pretty high when she told me about her finances, and that she will have to have good Debt to Income ratio.  I "suggested" (my exact word choice) that she "consider" paying-off the credit card to increase hercredit score and loan amount after she expressed frustration about not liking her choices and if she didn't have the debt likley she'd be qualified to buy more. I further stated that she should take a break until she gets that sorted out. Don't settle for less.

Is this approriate discussion between Realtors and Buyers?  Of course! We are not taxi drivers or there for their companionship. It was directly related to helping her find the right home, qualify for it, and afford it.  It was a matter of her time and mine, and it was not being well spent.

MYTH - A Realtor's job is to drive a Buyer around showing homes. 

FACT - Finding a home is a partnership between the Realtor, Buyer, and Lender.  A Realtors job is to qualify the Buyer's needs which is lifestyle, property and financial specific, which includes financial advice as it pertains to a loan.  Its best that Buyers drive those neighborhoods if they don't know them to evaluate drive time to work, child care, schools, etc. and to speak with neighbors to dig deep; get the real truth.

MYTH - A Realtors job is the show homes their Buyers want to see.

FACT - Home buying is not a hobby  but sometimes is for Buyers. If a Buyer finds a Realtor that shows every home their Buyers inquire about without pre-approval, then that Realtor is not being a good fiduciary and may be creating risk for home sellers and themselves. A Realtors job is to pre-qualify the Buyer to know what range they can afford to buy & are able to buy. In fact, some Listing Agents say in their Agent Remarks, "Only bring pre-approved buyers."  This is common in the upper price ranges.  Buyers, especially First Timers, often have no idea how inconvenient it is for sellers to show their home and that it creates a feeling of personal violation since their home is personal space. They deserve courtesy. Any buyer not pre-qualified has not provided their legal information which means they could be a rapist, thief, burglar, or just a time sucker.



Posted by
Cathy Criado President & Founder
Published Author
Your Real Estate Consultant!
999 E Basse Rd. #180-425, ​San Antonio, TX  78209​
​Direct:  (210) 560-1891
Criado Realty Logo

Comments (97)

Paddy Deighan MBA JD PhD - Vail, CO
Paddy Deighan J.D. Ph.D

there is a delicate balance to be certain, but it is prident not to give "financial advice" as it is outside teh scope of licensure and wihtin the domain of others, CFCs, Mortgage brokers etc...pre-qialifying a buyer is not providing financial advice

Jan 14, 2013 11:01 AM
Ed Silva
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

If we want to be tour guides, then we should get a meter and charge by the 1/8th mile. Knowing what a buyer is qualified to but is our business, maybe not with all the specifics, but they should at lest be qualified.

Jan 14, 2013 11:37 AM
Anna Maria Durr
Codemark Financial - Houston, TX
The time for financial discussions start at the pre approval level, not when the realtor is showing homes. The loan officer and buyer should be on the same page before the buyer starts looking at homes. That way no one gets offended.
Jan 14, 2013 12:10 PM
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

I don't take buyers out unless I have a pre-approval lender from their lender of choice. If prospective buyers don't have a lender, I can recommend a few. I never delve into a buyer's financials because it is not up to me to say. If their lender says they qualify, and I have a written letter, that's enough for me. Your theory about home shopping before pre-approval is a very valid point. If buyers are looking at homes that turn out to be above their price point, then they might be disappointed at what they are able to buy.

If buyers have questions about their loan I direct them to their lender. Some first-time home buyers may not know what an escrow account is, so I may explain that to them and how it works. I may also bring up home maintenance costs of being a home owner with first-time buyers because, in my opinion, this is an over-looked topic that I'm not sure lenders talk about with their clients.  Great post and discussion,

Jan 14, 2013 12:23 PM
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Cathy,  I require buyers to be pre-approved and have a letter from their lender before looking at houses. The lender generally has a detailed financial conversation with the buyer. As long as I know what purchase price the buyer qualifies for, I am satisfied.

Jan 14, 2013 01:29 PM
Kimo Jarrett
Cyber Properties - Huntington Beach, CA
Pro Lifestyle Solutions

Anna Maria, ,#85, sums it best and if you're licensed in other professions, accounting, tax, insurance, loan officer, etc., you can provide solutions that pertain to their similar circumstances fearlessly. You must have a client's full cooperation and candid financial understanding about their current financial outlook in order to assist them in selecting a home.

Jan 14, 2013 01:55 PM
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Cathy - I think we do give some financial advice as part of what we do.  I don't spend much time taking a buyer out unless they are pre-qualified.  It just doesn't make sense for anybody.

Jan 14, 2013 02:58 PM
Charles E. Jack, IV
Charles E. Jack Appraisal & Consulting - Las Vegas, NV

Maybe if more buyers had that education going into the housing crisis, they would be better off today and many would not have made the bad decisions that they did.  

I don't know about you, but I feel pain for every home that was purchased that I assisted with that people lost money on or lost to foreclosure.  In hindsight there were so many signs of the housing crash that we should have seen and communicated to our clients.  

Imagine what the person you would have discouraged from buying a home in 2006 or 2007 when a fry chef could buy a mansion would be saying about you today.  That kind of rumor on the street about your knowledge and ethical reputation would be priceless.  

Keep giving advice for things you feel qualified and experienced in.  Keep referring to other qualilfied professionals you know and trust for things you don't feel qualified and experienced in.  

Jan 14, 2013 06:49 PM
Steve Warrene
Your Town Realty - Lower Burrell, PA
Pittsburgh Real Estate Investment Specialists

Cathy, before we show any properties to people be have them pre qualify with our lender OR if they are pre qualified with someone else we ask for a copy of the preapproval.  That way we can see whats on it AND it mentally lets the buyers know we are now working together.

Jan 14, 2013 07:09 PM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Cathy, we can't give financial advice or legal or medical or etc. advie.  And the buyers know it all about real estate.  What good are we?  lol

Jan 14, 2013 07:10 PM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA

Advising them of a potential issue and providing them the information to get MORE or BETTER information should be in our job description

Jan 14, 2013 07:38 PM
Nancy Viejo
Top Flite Financial Inc - Panama City Beach, FL
Growth, Excellence, Impact

Sorry but I get very upset when I see a Real Estate Agent giving financial advise. It is really not your job and actually can put your livelyhood in jeprody.  Not all "Lenders" are created equal. If what you are working with are inexperienced bank tellers and loan officers, please do your prospects a favor and find more experienced people to work with. I have 18 years in mortgage lending and brokering and own my company. I am highly trained and educated in the mortgage field. However, there are places I do not go to concerning finances with a prospect. Sometimes the best advise is to refer them to a financial planner or to their accountant. If this lady is a retiring doctor, chances are she has a more complicated financial picture than you or I should be dealing with. It is not a loan officers job to give financial advise either. Simple advise, like explaining debt to income ratios and over extended credit is different than deep financial advise. What I would advise you do is have a financial planner, an accountant and a mortgage person work with you on your classes or maybe rotate with appraisers, title, insurance, and surveyors. Speialize each class with one or two of the above. My husband has been a Real Estate Broker and a top producer in our area as well as owning his company. I do know A LOT about real estate sales. But I would never give that kind of advise. No matter what your background, to your prospect, you are a Real Estate Agent. 

Jan 14, 2013 10:00 PM
Theresa Akin

Susan McCall:

So before showing your buyers the house, you didn't tell them it was a "Short Sale" and explain the process before showing them the house? When I work with buyers, I explain short sales and the process before I even pull any of those listings to show. If they still want to look at them, I re-itirate the process and also ask howsoon they want to move in. I would have been angry with you also and walked out. If there had been a representaton agreement, it would've been voided. Short sales can take up to 18 months and then still go into foreclosure, especially if they've not been approved. That was a big waste of time wasn't it, especially for the buyers. I feel for the buyers. 

Jan 14, 2013 11:03 PM
Buster Avila
RE/MAX Metro - Saint Petersburg, FL

Cathy -

I would like to compliment you on your "myths busted" because on first reading (before getting into the comments), I thought that was the focus of your blogpost.  

The issue of "financial advice" has taken an interesting turn - after all, our profession is so deeply tied with money that making a stray comment about finances certainly can't be avoided.  I think Nancy #94 clarified a bit...I personally stay away from all discussion about loans and rates and mortgages, as well as investing, future expectations of value, taxes, retirement plans, etc - I would consider that "deep financial advice" (per Nancy).

But you'd find a dozen AR blogs written quite recently, advising buyers not to make any changes to their credit rating until after closing (don't buy a car, don't charge new furniture, don't get a new credit card, don't miss a payment, etc), but I don't think anybody criticized those writers about giving out inappropriate finanacial advice (granted, many of them may have been mortgage brokers or otherwise finance qualified).   I would consider this fall into the "simple financial advice" category.  

Sometimes you just have to tell someone the simple truth - that if they want a home in this neighborhood (in this price range), they need to buckle down and pay down that 5-digit credit card debt, stop buying expensive new cars every three years, and save, save, save!

Jan 14, 2013 11:24 PM
Rob Renk
Center Street Lending - McKinney, TX
AE | Fast Fix/Flip Loans for Residential Investors

ONly iof yo have the financial knowledge to be able to give the advice, otherwise refer your client to person who is more knowledgeable.

Jan 15, 2013 04:05 AM
Edward Gilmartin
CRE - Boston, MA

I find it smart to send customer to mortgage professional for pre qualification rather than delve into their finances. If they won't do this don't waste  your time with them

Apr 29, 2021 06:16 AM
Sham Reddy CRS
Howard Hanna RE Services, Dayton, OH - Dayton, OH

Thnaks for sharing Cathy!

As Realtors we wear many hats, including but not limited to helping buyers prepare for the process of home buying, financially and emotionally. Buying a house is a big deal!   That means we pre-qualify them

Apr 30, 2021 04:39 AM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Cathy - I saw this post in the BananaTude Group and didn't realize it was written eight years ago.  Not every contact we meet in real estate is a connection.   I am not sure what more to add to the conversation now.  Lessons learned.  Hopefully.  

Apr 30, 2021 05:19 AM
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Always good to see new life in an old post. And, the points are as true today as then. Admittedly, we need to walk a fine line when giving any financial or legal advice. Bernie is an attorney, and our clients often want his legal input. He has to very carefully let them know he has to advise them to discuss legal concerns with an attorney. And, that he is not licensed in Washington. Even when he knows the answer, he proceeds with caution - it's a tough one. I assume financial advice is simiar and that we should always suggest clients consult their accountant, lender, or financial adviser. I would likely say, "I'm concerned about your debt to income ratio, and think you need to get clarification about your borrowing power from your lender. When we know how much home you can afford, then we can continue looking at the homes available." 

Apr 30, 2021 05:57 AM
Cathy Criado

Good to see you again Deb! Thanks for stopping by!

Apr 30, 2021 08:30 PM
Kat Palmiotti
406-270-3667,, Broker/REALTOR® - Kalispell, MT
Helping your Montana dreams take root

I do not provide financial advice, except to ensure any buyers have a recent preapproval or proof of funds so they are ready to jump in as soon as they see a home they love. The financial experts give them financial guidance. As for just being someone that opens doors, I agree - that's not what we are here for. Accessing homes is just one of many steps that is required to get them to the closing table.

Apr 30, 2021 06:16 AM