The Field of Forbidden Fruit...The Buyers' Risk of Skipping Pre-Qual

By
Real Estate Broker/Owner with MoonDancer Realty, Dillsboro,NC NC# 218097
 
Sometimes buyers want to skip or don't know the first crucial step in home buying of establishing a Talk to a lenderrelationship with a lender and getting themselves pre-qualified for a loan. Even worse, sometimes the Buyers' Agent allows them to skip that step. A missed step can mean a bad fall. There is a real risk to the buyer if they haven't determined their ability to purchase a house first as well as sought the guidance of a loan officer to figure out their price range. The consequence is that buyers will shop based solely on their wants instead of their wherewithal and in most cases that most perfect of house will always lie in the field of forbidden fruit.
 
As agents assist buyers in their search for a new home, we are defining a "standard" of house. The standard is fluid in the beginning. When we look in a pre-determined price range of affordable houses, some houses fall below the standard while others can exceed the standard. That's our goal...to help our buyers find a house that exceeds their standards AND that they CAN afford.
 
The danger of looking in the field of forbidden fruit first is that most of the houses will certainly exceed the buyers' expectations and will become the "standard" of what they want in a house. More than likely they will fall in love with one of these houses. Not just a wistful sigh laden love that they know they'll have to work towards but hopelessly, headlessly over heel-lessly in love. This will become such an ill-fated love affair once they inform their lender of their choice, that no other house will EVER measure up to this first love. In my opinion, the agent who encouragd their buyer to travel to the land of forbidden fruit in the first place deserves to reap what they allowed to be sowed.
 
While the real estate market slowly begins to morph from a buyers' market to a balanced market and the lenders are still so gun shy about making loans at all, it is more important than ever for buyers to engage in a conversation with a lender well before a REALTOR is asked to show the first house. The buyer and the REALTOR should always strive to make the real estate transaction process as pleasant and productive as possible. Buyers are encouraged at all costs avoid the risk of not getting pre-qualified with a lender and the certain consequence of dallying in the disappointing and possibly poisonous trip to the field of forbidden fruit.
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Re-Blogged 2 times:

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Topic:
Home Buying
Groups:
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Tags:
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prequalifying buyers

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Rainmaker
694,665
Clint Mckie
Desert Sun Home, commercial Inspections - Carlsbad, NM
Desert Sun Home, Comm. Inspection 1-575-706-5586

Hi Mona,

I have had client's call me about a home inspection befor they even had seen any homes. When I ask if they have a Realtor yet they say no. Pre approval? What's that.

Oh boy I have a lot to tell them. LOL

Alwats get pre approved for the amount you need then proceed with a Realtor.

Have a great day in Dillsboro.

Best, Clint McKie

Apr 25, 2013 01:04 AM #8
Rainmaker
1,250,578
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Suggested!  Suggested!   Such wise advice, Mona!  I particularly like that you promote seeing a Mortgage Lender WELL IN ADVANCE of actually needing your financing.  Unbelievably important, especially for first-time buyers, those that have suffered through short sales, foreclosures, or bankruptcy ... or have not financed within the last few years.

Did I mention that I'm "Suggesting" this???

Gene

PS:  And Re-Blogging!!

Apr 25, 2013 02:32 AM #9
Rainmaker
1,124,129
John G. Johnston
John G. Johnston & Associates, LLC - Westcliffe, CO
An Exclusive Buyer's Agent ~ Westcliffe, CO

Mona  I saw this blog via Gene's re-blog.  I am working wit a buyer right now that actually brought me a preapproval letter!!!

Apr 25, 2013 03:03 AM #10
Rainmaker
638,244
Maria Morton
Platinum Realty - Kansas City, MO
Kansas City Real Estate 816-560-3758

Mona, love the way you describe this as the 'field of forbidden fruit'! True and well put.

Apr 25, 2013 03:05 AM #11
Rainmaker
633,224
MaryKay Shumway
The Kellstrom Ray Agency, Inc. (Est. 1948) - Sister Bay, WI
Door County Wisconsin's Real Estate Expert

Just got back from teaching my semi-annual economic class to high school seniors on buying their first home and what do you think I stressed, stressed, stressed?  The importance of pre-approval as opposed to a prequal before you begin your home search!   It's the first thing we should convey to a potential buyer.  Great post.

Apr 25, 2013 03:06 AM #12
Rainer
212,000
Kristen Correa, Broker
Kristen Correa Real Estate & Reedy Creek Realty Services - Keller, TX
I love coffee & real estate. I am out of coffee!

"...that most perfect of house will always lie in the field of forbidden fruit." So true. Or you could have just stopped at "...that most perfect of house will [just be a] lie..."

Apr 25, 2013 03:13 AM #13
Ambassador
768,133
Charita Cadenhead
Keller Williams Realty - Birmingham, AL
Serving Jefferson and Shelby Counties (Alabama)

Mona not getting pre-approved ahead of time makes it tough for everyone:  they buyer, their agent, the seller and the seller's agent.  Making offers without a pre-approval letters binds up everyone's time who is actively participating in patronizing the buyer that has failed to see loan approval.

Apr 25, 2013 03:17 AM #14
Rainmaker
1,970,859
Andrew Mooers | 207.532.6573
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Also try to get sellers to price their property on the upper end of a lower bracket so it will show up. There are lots of buyers that don't go to the deep end of the listing pool where they can not touch. And then ta da, the listing with a little whittling on the property price shows up in a search and looks brand new!

Apr 25, 2013 04:22 AM #15
Rainmaker
1,320,230
Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Two questions that I ask within the first few minutes are...

  • Are you working with an agent?
  • Are you pre-approved or pre-qualified?

If the buyer hasn't been pre-approved, I recommend a mortgage lender who will help them in that area. 

Apr 25, 2013 04:39 AM #16
Rainmaker
1,508,614
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

This is so true - if they don't' have a pre-approval, it's impossible to know what they can really purchase.  AND, when they DO find that perfect home, they can't make an offer.   Not until the pre-approval is done because listing agents won't accept the offer without the pre-approval.  And if they can't make an offer when they find the right house, they just might lose it to someone who WAS ready.

Apr 25, 2013 04:49 AM #17
Rainmaker
671,078
Patty Da Silva, Davie, Southwest Ranches Cooper City, Plantation, Weston, REALTOR
BROKER of Green Realty Properties® - 954-667-7253 - Davie, FL
Top Listing Broker

Mona,

I will never understand how agents work with buyers before they are pre-approved... I often receive offers without pre-approvals and I have to explain to the buyer's agent that the buyers ABILITY to purchase is of the most importance, they can WANT to buy but seller needs to see that they CAN buy.

Apr 25, 2013 09:38 AM #18
Rainmaker
752,988
Andrea Bedard
Thompson Company, REALTORS® - Silver Spring, MD
M.A.; REALTOR® Silver Spring, MD and beyond

Hi Mona, customers without a pre-approval are not buyers but window shoppers. It's like going to the mall without credit cards or cash. I always meet customers for an initial face-to-face meeting during which I strongly suggest to talk to a lender if they haven't already done so... and then they become my clients.

I haven't had anybody who was serious about buying say "no, I want to look first".

Apr 25, 2013 12:48 PM #19
Ambassador
643,299
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Carol, sometimes they get discouraged when they do the first steps later and delay purchasing anything.

Sally and David, nothing else measures up once people look in a higher price range than what they can afford.

Roger, it isn't called "forbidden" for nothing!

Wayne, thank you!~

Cindy, that's true.  Usually though the pre-qual letter puts the buyer in the right ball field.

John, thanks...it worked.

Will, I never get it when people want to look first THEN talk to the lender.

Clint, you give good advice and are a real friend to REALTORS.

Gene, I'd appreciate it if you would consider suggesting the post, lol.

John, then it seems you'll have a successful contract and a happy buyer.

Maria, thanks very much.

MaryKay, thanks.   It's an important topic to stress when you are teaching.  Good work.

Kristen...good insight.

Charita, we all deliver the message so often that it's hard to believe some people still miss it.

Andrew, good advice.

Sheri, absolutely.  We have a page and a blogpost ready to hand out to the buyers.

Kat, the only thing that makes sense is to take care of talking to the lender first.  It would be doubly upsetting to lose out on the house you want because you didn't take care of the first steps first.

Patty, sometimes the buyer might think that the only thing that matters is what they want, they'll be far more successful in their endeavors if they look at the bigger picture and realize they'll also need to address what the seller wants too.

Andrea, so true.  If they aren't willing to sign the agency disclosure, the buyer agency agreement and talk to a lender...we're all just wasting time.

Apr 25, 2013 01:25 PM #20
Ambassador
1,542,873
William Johnson
Retired - La Jolla, CA
Retired Real Estate Professional
Hi Mona, This is a superb writing Mona and certainly advise that should be understood and followed by every buyer in any market.
Apr 25, 2013 03:22 PM #21
Ambassador
643,299
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Hi William, great to hear from you and thank you so much.

Apr 25, 2013 09:39 PM #22
Rainer
8,531
Mike Hall
Hasson Company Realtors - Lake Oswego, OR

It's a smart business practice to insist on a reliable preapproval letter in the file before you invest heavily in a buyer.  Wouldn't it be wonderful too, all preapproval letters were reliable?  When you know the lender to be reliable, OK.  But today, how many of your buyers are using "some other" lender?  If you don't know the lender's work...then it's worth a 10 minute phone call to check up on them.  (True whether buyers' or listing broker.)  Without putting you in a position of knowing more than you want to (as a Realtor), you can gain valuable insight about how reliable the preapproval is by asking some basic questions about it.  Like... 

  • have you pulled credit? 
  • have you verified income? 
  • have you verified down payment/assets? 
  • any contingent funds...like waiting for a tax refund or ?
  • what about the file MIGHT be a sticking point?  

I hope this helps us all raise the playing field!!!

Mike

Apr 25, 2013 11:54 PM #23
Rainer
139,841
Ridhi Raheja
Movement Mortgage (Illinois) - Naperville, IL
FHA, 203k, VA, Jumbo, PreApproval, Jumbo Home Loan

Great reminder for both Agents and Buyer Mona. As a lender, agents need to inform their clients the importance of a loan pre-qualification and why they must not skip it. With that, both agents and buyer are aware of what houses they are qualified to apply and buy to avoid disappointments.

Apr 26, 2013 04:06 AM #24
Ambassador
643,299
Mona Gersky
MoonDancer Realty, Dillsboro,NC - Sylva, NC
GRI,IMSD-Taking the mystery out of real estate.

Mike and Ridhi, we are so fortunate to have so many good lenders in AR sharing their advice and experience with us.  Mike that's a great check list to determine exactly how deep the lender went in the pre-quaifying conversation.

Apr 26, 2013 10:34 PM #25
Ambassador
1,704,410
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

Mona, I always just buyers get a pre-qualification. I certainly don't want them to fall in love with the "forbidden fruit".

Apr 28, 2013 02:04 PM #26
Rainmaker
1,143,971
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Hey Mona, great post. Lenders should not be gunshy now. If buyers can prove income and have maintained decent credit then a loan should be available for them but its always smart to find out early on before time and effort and money is spent if no transacting is possible

Apr 28, 2013 02:18 PM #27
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GRI,IMSD-Taking the mystery out of real estate.
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