Do You Pre-Qualify Your Buyers Yourself?

Most of the realtors in my area, are going another step and asking for a pre-approval.

Where we go through the same process as a mortgage but without the appraisal and title work.

This seems to be what the sellers and agents are looking for.

Kate~ I think it is in everyone's best interest to -pre-qualify buyers BEFORE showing homes!  Most sellers insist that all person's qualify for the home before they are shown it.  If a buyers looks at a home and then later can't afford it, it is a huge letdown for them and depressing as well.  It keeps all of us from wasting our time, buyers and sellers included!

I try to pre qualify all my potential buyers. There are many first time buyers that don't have a clue as to amount of extra money it takes to own instead of rent. With the price of fuel right now it is hard to justify showing people for days on end if you don't know if they can in fact purchase

Hi Kate,
I do not financially pre-qualify my buyers.  If they are not already working with a lender I will recommend lenders, have them obtain "pre-approval", then proceed to help them find a home.  With the rigid financial contingency within our GA real estate contracts, pre-qualification isn't enough.  Within our Purchase and Sale Agreement we have to negotiate a certain period of time for the buyer to have full loan approval, so in order to be fully prepared I require that they are pre-approved prior to finding a home and making an offer.

I do pre-qualify with regard to finding out their motivation, if they have a home to sell/close, if they are working with a lender, if they have been working with another real estate agent, etc.  But I leave the financing to lending professionals!

Kate, I have my own personal rule of thumb and that is:  I want to make sure from my buyers that they have "x" amount in their savings, 401(k), checking so that if someone becomes ill or the medical bills mount due to illness, then they are protected from loosing their home.

Do I pre-qualify them?  I have them pre-approved with the lender before I will ever work with them.  I do meet with them and have a consultation with them about owning real estate for the first time, whether it be owner-occupied investment (I meet, talk, explain, work out a chart, have a book for them to read and I question them); for owner-occupied home (I meet, talk, explain, work out a financial plan, have a different book for them to read to understand maintenance of a home and how preventive maintenance is better then reactive maintenance; and for condos (I meet, talk, explain, read the condo docs and by-laws to them, have them understand the red flags in property management, push for their involvement on the condo association.

Look at this another way, you have your gallbladder taken out - does the doctor slap you on the "behind" and send you on your way or does he explain the procedure, why, what will happen if I disobey him. 

I do this everyday and the client that comes to your door doesn't buy every day.  Do you give your buyer's the market update for the last 30 days, 60 days, 90 days, 6 months, 9 months, one year, two years ago, three years ago to understand what is happening in the neighborhood of their choice?  Do they know the difference and efficiency of boiler heat vs forced air gas in a brick structure versus frame?  What's the difference in life between architectural shingles vs standard shingles in the different climates where the wind may gust versus an environment where there is constant heat beating down on the building.  Does color of shingle make a difference not only for curb appeal but for energy efficiency? 

Yes, I have them pre-approved by the bank because my time is valuable and yes, I pre-qualify on their knowledge of the market place, and qualifying their knowledge of home maintenance, understanding the importance of property maintenance and yes, I told the buyer (I am the listing agent) that they should consider putting less down, saving that 10% for possible needed repairs, but better yet, in case of emergency for health, life or job.  I had a print out of the differential in the mortgage payment and it made perfectly good sense.

I was doing my job as a Realtor - making Joe Q Public aware of all the options. 

Kate, I try to pre-qualify then pre-approve all buyers so we all are not wasting each other's time.

Kate, I don't do it, but I do have a lender that I know and trust do the job for me.  I like to know as little as possible about my client's finances because so many of them are friends, and I feel like I don't need to know.  But one thing, I think that it's important that whatever you do in terms of qualifying, it be consistent.  That way, the fair housing police will have no issues with at least that aspect of how you do business.

Hi Kathleen;

 I always asked my new clients to be pre-qualify for a mortgage, we all should know what they can afford to purchase before we take them out.

Good Post Kate,

I think that asking a client if they have a pre-qualifying letter is a bit condesending, especially if they are 1st time home buyers.  Afterall, it's part of our job to educate them on the home buying process.  If they don't even know what a pre-qualifying letter is they may feel a bit intimidated from the get go.  Not a great way to start off in my opinion.

On the other hand, if they are an investor or experienced home buyer this could be an insult and could cost you a client.  I actually have a friend who will not work with an agent if they ask for a pre-qualifying letter before he submits an offer.  It is almost instintive to be able to pick up on who needs what and if they are experienced or not.

Thanks,

Tara

I agree that it is instinctive.  Many of the clients I work with are either retiring to Paso Robles or investing  here with retirement in mind down the road.  I do ask a lot of questions about where they live, their professions and their reasons for wanting to purchase real estate in Paso.  If their move here is predicated on selling their personal residence, I let them know that the loan officer will need the HUD-1 to prove their ability to purchase another home here. 

In most cases, it becomes very obvious whether they are in a position to purchase or not.  If it isn't obvious to me or it seems like they don't have a lot of confidence with regard to whether they can afford to purchase a home, then I suggest that they meet with a loan officer, either our inhouse person or one of their choosing; especially since the cost of gas is now up around $4.59 a gallon.

KATE - I do a bit of pre-qualifying, but I really leave it up to a lender.  Most homes around here require a pre-approval from a lender to be submitted with the offer.  I've also found that people are more comfortable sharing their documents with a lender because they know that it is necessary.

Kate, I rely on the mortgage professional but I like to read these comments.  Some excellent points have been made. 

I pre qualify all borrowers and most of the time sellers.  I am licensed as a mortgage professional and it takes the guess work out of the equation.  I pull credit and immediately know if I need to get in my car and show houses or not.

I do go through finances with some of our buyers... the ones I don't are typically not in need of financial counseling.  I'm a little leery of delving too far into that arena... In Bryant's post, even having the money in the bank might not have saved her from foreclosure.  What if she had invested that money and lost it.  There are far too man variables.  I have a group of lender I trust implicitly and they do the bulk of the heavy lifting where financing is concerned.

You always ask great questions.  I get potential buyers to a lender as soon as possible. 

Kathleen: I would NOT attempt this as I can't see what is on their credit report. This is why they have a lender to pull the credit report

It's interesting how I've changed my approach with buyers. In prior years I had my buyers get to a lender before I did much work at all because I belived this would guide us to the price-area they want. Since being back into the business I have dealt with mostly Internet leads and they seem to be a different animal all together.

I would be interesteed in hearing how soon agents "push" their buyers to a lender. I use email campaigns to stay in front of the buyers and some of those do talk about getting pre-approved but i put them on auto updated for homes and have even taken some out to see home without the approval.

Thoughts???

Jay, I guess I will always attempt to take the total professional approach.  The reason we have so much confusion and stress in this industry is because we bend over backward to help the client.  But what I don't see is how that many of the things we do, help us in the long run.  So I try as hard as I can, not perfect; to take charge of the situation.  Pre qualifying people just seems like the right thing to do first.

I even do a buyer consultation unless I have prequalified them and sent them to my lender.