Agent2Agent in Morris County>Question Details

Suzanne MacD…, Real Estate Pro in Morristown, NJ

How do YOU prequalify a buyer?

Asked by Suzanne MacDowell, Morristown, NJ Wed May 25, 2011

Anotther agent brought a buyer for my short sale listing. We have been under contract since mid-February. Just yesterday we learned the buyer has been unsuccessful in getting his mortgage commitment because...are you ready for this...he had both a foreclosure and bankruptcy barely 3 years ago, his credit score is only 600 AND there are problems with the way he reports his income on his tax returns (he's self-employed and does his won taxes). I have been asking his agent for weeks now, "Are you in touch with his lender? Do you know what is holding things up?" and her response is "I don't know this lender." REALLY? I thought the days when we would just accept any old pre-approval letter without verifying the buyers' ability to actually qualify for a mortgage were gone! I mean if you can't depend on your colleagues to bring a 'willing, ready and ABLE buyer, who CAN you depend on? What do you think?

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Never, ever, ever ..... send a buyer to be qualified by a mortgage guy UNTIL they have been to a financial planner for counseling. I've been doing this for 5 years and recent studies by NAR and others show that sucessful escrow closure rates are twice as high and foreclosure rates are cut in half when a buyer has been to a financial counselor before they start shopping for a mortgage. High net worth individuals get a pass, but all others should get some level of counseling.
2 votes Thank Flag Link Wed May 25, 2011
This is why many bank-owned properties require that the buyer be pre-qualified through an approved lender before they will even look at an offer. I think that it is good practice. It certainly takes the surprises out before closing.
0 votes Thank Flag Link Tue May 31, 2011

If I have not worked with the co-broke and don't know the lending insititution that has issued the pre-approval letter then I ask the buyer to speak with a lender I do a lot of work with. I do not dictate who they finance with, but I do want a trusted professional that I work with you speak with the buyer and run their scenarios.

I have found that only buyers that have something to hide will balk at this request. This has saved so many deals and allows the professionals to be involved in the transaction. I hope this is helpfu. Best
0 votes Thank Flag Link Tue May 31, 2011
Suzanne - I usually call the lender myself just as Deborah has commented. It usually gives you a better feel about the buyer.
0 votes Thank Flag Link Tue May 31, 2011
Frustrating indeed - it reminds us as well that both sides can ask these questions. As a matter of fact, I have an offer and acceptance and the buyer is working with a firm I've not heard of. My next stop is to do some due diligence myself, including asking my trusted mortgage professional if they have any experience with this lender. Thanks for the reminder!

Jeanne Feenick
Unwavering Commitment to Service
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0 votes Thank Flag Link Tue May 31, 2011

I always call the Lender when I receive an offer before I even present it to the seller. I usually can get a pretty good gut instinct if there is a problem with the buyer and their financing. Let's face it, these days is nothing like it use to be. I've been selling for over 15 years and thought I had seen everything until the last couple of years.

Best of luck closing!

0 votes Thank Flag Link Mon May 30, 2011
I preapprove buyers just as though they are applying for the mortgage at that moment. I run credit ands ask detailed questions and follow up on any red-flag items, and then in many cases I ask them to email employment and bank documents. However just as important is qualifying the property, especially in the case of distress sales which might require a 203k loan or other special considerations.
Ruth Bonapace
0 votes Thank Flag Link Mon May 30, 2011
Oh wow Suzanne,
I never go out with any buyer who does not have a Pre-Qual for a loan. I actually had one "buyer" come in with something that looked like it came off her home computer and was not signed, saying that was her Pre-Qual. When I brought my loan officer in to re-do this she refused. I doubt that young lady was able to purchase. I agree with you that it's not a buyer...if they cannot actually Buy.
0 votes Thank Flag Link Wed May 25, 2011
We have a great Mortgage brokers which I refer them to.This way we don't waste time looking at homes above their price range.
Gladys Viruet
Keller Williams Realty Sales Associate
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0 votes Thank Flag Link Wed May 25, 2011
If i am the listing agent i ask for a prequailifictaion and indeed call them before an offer is presented to my seller. if i am teh buyer agent, i have them use 1 of a few loan offciers who have done a great job in teh opast and i can trust to gove an honest opinion, if they give a prequailification letter, that buyer can get a loan....
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0 votes Thank Flag Link Wed May 25, 2011
Thanks, everybody. Actually both the lender and the agent have very good reputations!?! The agent is associated with a high powered and well respected team. That is what I find particularly disappinting, she should have known better. So, I guess a good reputation is not enough these days, I will take your advice to heart and interview buyers myself going forward, as well as putting some fail safe measures into place.
0 votes Thank Flag Link Wed May 25, 2011
There may be another side to this story.
The population of citizens matching this buyers profile will increase. We could see buyers with truly strong cash flow but FICO is in the toilet.

There are opportunities here that benefit both the homeowner and the buyer. In your case, the subject property was under contract making the discussion irrelevant. If you have other distressed home sales, explore what can be done that would be beneficial to both the owner and buyer. After all, our service is help and our product is solutions. Unfortunately, in the wild wild west of short sales, skilled and knowledgeable agents are required on both sides of the transaction. Sometimes that just seem too much to expect. Why would a real estate professional take a buyer on a lookie spree who they know can't finance a happy meal and has no optional proposition?

Additionally, when an offer is presented on one of my listings specifing a lender I do not know and is not local. red flags go up and penalties go into the contract.
0 votes Thank Flag Link Wed May 25, 2011
Always bullet Proof your deals.

This is a very bad situation and in the future avoid this by Bullet Proofing your deals. This is important for you to get paid and also in your clients best interest foremost. When dealing with Short Sales or any sale for that matter, you have a very important job to handle your clients interests and the banks.

As the listing agent you must adhere to stringent criteria and require to talk with the lender. Ask them all the questions you ask your buyer. Even if they seem basic and redundant. "ASK!" Some things the lender may not want to provide but always ask and require.

But I will say the lender and buyers agent in this case are terrible. Make sure you control every part of this deal in the future. Let your guard down once and you will get smoked, as you already have.

Larry Sarlo
RE/MAX Preferred
0 votes Thank Flag Link Wed May 25, 2011
All too common and Listing Agent should ask for permission to talk to Mortgage Broker. There is not way to always
figure out a "real" Buyer but the Mortgage Broker here is obviously not very good at what they do. In fact, this is a travesty as both FICO score and background of Bankruptcy had to show up! Shame on the Lender
0 votes Thank Flag Link Wed May 25, 2011
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