Why are realtors telling people that they cannot take a tour of a foreclosed home unless they have a pre-approval letter? I can totally understand

Asked by Tp, Saint Johns, MI Fri Oct 9, 2009

making an offer and needing a letter. But I think it's a bit of an insult to the consumer/buyer to ask for a preapproval letter in order to view ahome. Is this a bank contigency, or something the realtor has hatched in order to weed out those that aren't going to buy? Also keep in mind that these are NOT half a million dollar houses and up that are asking for these preapproval letters these are houses listed under $150,000.

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Voices Member, , Benton County, OR
Mon Oct 12, 2009
BEST ANSWER
Tp

It's really all pretty simple..Some Agents say Pre-Approval required and some do not....

As a Consumer you only have to ask when you contact them and can move on to an Agent you are more comfortable with..
The comments so far suggest to me that the Required Pre-Approval seems to be something some Agents feel a need to use and that is OK but I am sure there are Agents who do not...
There are a lot of Agents, find one who doesn't require a Pre-Approval to be shown properties, that's your right as a consumer, find an Agent that's right for YOU...

Good luck, Dunes
0 votes
J R, , New York, NY
Fri Oct 9, 2009
All foreclosures I have shown have required offers to be submitted with preapprovals. In my opinion, every agent should have a preapproval letter on file for every buyer they take out. My last two buyers did not have preapprovals in place. The first lost a home that they had an accepted offer on. While they were getting their proof of funds, another buyer offered more. The second found out they could not borrow as much as they thought. FYI the selling prices were 500,000 on the first and 80,000 on the second. So it has nothing to do with the price of a home and all to do with being ready willing and ABLE to buy. And able to prove you can buy. No attorney will let their seller client sign without proof of funds. As of these two occurances, I will not be showing homes unless I have a buyer's preapproval.
2 votes
Sonya Loose, Agent, Beaverton, MI
Fri Oct 9, 2009
TP, in my opinion you should have a proof of funds letter or a bank pre-approval before you begin to look at any real estate, bank owned or otherwise. Why would it be in your best interest to look at homes you are not qualified to purchase? Sometimes consumers mix up their real estate professional with a tour guide so it is up to the agent to be the professional and treat the process of looking at homes as such. But to answer your question bank owned homes in my area require a proof of funds letter or pre-approval letter to accompany all offers regardless of price.
2 votes
Lisa Bender, , Howell, MI
Fri Oct 9, 2009
Tp ... all offers submitted do require pre-approval letters. As for just showing a home, I find it good practice to only spend time on those individuals who truly want to buy and not just "tour the home" for fun. As Maureen mentioned we earn our living ONLY when everyone signs on the dotted line. I wouldn't be able to service my serious buyers or sellers if I was spending all my time driving uninterested buyers to tour homes all day long. I find it insulting that someone would expect me to show them a home when they had no real intentions of buying a home in the near future. A lot of people also think they can get pre-approved for a loan only to find out after they and the Realtor have seen 15-20 homes do not qualify for a loan. Or learn their credit is worse than they thought. Why would a buyer want to waste their time as well?

Hopefully this helps put things into perspective.

Sincerely,
Lisa Bender
Web Reference:  http://www.ClickThisHome.com
2 votes
Maureen Fran…, Agent, Birmingham, MI
Fri Oct 9, 2009
I doubt the bank would require that. They probably don't care.

The agents might be tired of going to show houses that people cannot buy. I can only guess that is the case. Afterall, the agent only gets paid when a house sells, not for showing it, and if the buyer can't afford to buy the home then there is not much point in spending time looking at it.

Personally, I have never seen pre-approval requirements on anything other than homes priced over a million dollars in my market, and even then they are rare.

If you have a buyer's agent, they should show you whatever you want to see. They will advocate for you. There are a number of pitfalls that come with foreclosed homes, so you will benefit from a buyer's agent's experience and knowledge.

Best of luck!
2 votes
Dianne Hicks, Agent, Rancho Bernardo, CA
Tue Aug 16, 2011
Although I have NEVER seen a bank require it for showing the home, you do not stand a prayer of getting an offer accepted without pre-approval or proof of funds if it is a cash deal. That is the reality of today's market, at least it is here in my area. If you wrote an offer with a preapproval it would hit the listing agents trash can. They often even make you do a cross qualification with their lender to be certain you are in the position to purchase. Sooo... if a buyer is not willing to do this, it does tell me, they are not serious.

Have I shown houses without it? Yes but it is becoming less and less often because I do not want to take buyers out and show them houses if they cannot afford it. It sets them up for disappointment when they realize they cannot afford it and also it becomes more difficult because their expectations of what they want is now higher.

Good Luck!!!
Kindest Regards,
Dianne Hicks
1 vote
Tammy Hayes, Agent, Port Charlotte, FL
Tue Aug 16, 2011
Buying a foreclosed property can differ in many ways than other more standard transactions. All offers are contingent on financing and must be accompanied by a pre-approval letter. Some banks require a pre-approval letter from a certain lender, so be sure to read guidelines before submitting an offer. All cash offers require proof of funds with the letterhead of where the funds are being held and the buyers name listed. Actual account numbers can be blackened out, as long as buyers name is easily visible. Write your offer as seller chooses the title company as they have already started preliminary title work on these properties.

All offers must be written offers, on an As-Is contract only Some banks supply addendums in advance, and if that is the case it will be in the MLS as an attachment and should be signed and dated and submitted along with your offer. In most cases, however, the bank addendums are provided only after buyer and seller come to agreement. At that time, the bank will send their bank addendums/counter offer for buyer's signatures. Please note at this point, the bank has still not signed anything, and most likely will not sign until ALL forms have been signed by the buyer. Your offer is considered a pending contract until it is returned from the bank/seller with their final approval. In the interim, all offers that come in must be presented. When signing and initialing a bank addendum, do not alter it in any way or it will be rejected.

The usual time frame for a response to your offer is 3-5 business days, although sometimes a little sooner and occasionally a bit longer. Allow plenty of time for acceptance, and for closing the deal, 30-45 days in most cases.

If you are requesting seller concessions for buyers closing cots, pre-paids, or repairs, make sure those are requested in the written offer, as adding these things at a later date can be very difficult and most times impossible. If you are writing an offer for an FHA or VA purchase, please make sure the property will meet the standards for this type of financing. The majority of the time, repairs are not permitted prior to closing. Ask the lender if they allow the buyer to escrow their own funds for repairs.

Once you have a fully executed contract, time is of the essence. All inspections must be done in a timely manner according to the contract. Should the buyer not be accepting the conditions, written notice must be obtained prior to end of inspection period along with a signed cancellation and release form. Some banks will make earnest money non-refundable after the end of the inspection period. Read your addendums carefully.

Please note that bank owned properties closings are considered mail-aways, because the title companies that are used to close the transactions are usually located out of our general area. Some will send a mobile notary to the buyers agents office to close the transaction and then all documents are overnighted to the title company, but it is not considered officially closed until all original documents and funds are received.
1 vote
Annette Levi…, , New York, NY
Tue Aug 16, 2011
Tp, it is the bank or HUD that requires the pre approval before realtors are able to show you REO. How do you know what amount of mortgage you qualify for unless you know how to underwrite a mortgage. I have been in the mortgage field for over 25 years but I still do a computerized underwriting to make sure the buyer qualifies for what they want to spend. It isn't an insult to the buyer to make sure they are looking at homes they can afford. This makes alot of more sense then looking at homes and then finding out you wasted your time because you do not qualify for the mortgage amount.
1 vote
Carmen Brode…, Agent, Scottsdale, AZ
Mon Aug 15, 2011
Let me turn the tables and ask you this, if you are selling your home, should an agent show your home to strangers who a) either can't prove they have the funds if paying cash or b) can't get the lending required? The answer obviously is no. Its for the sellers security, and the buyer brokers also. Its as simple as that. In this economy or any economy. It doesn't matter.

People will misrepresent themselves to be buyers for a number of reasons, including casing a home to steal from it later. Unless the agent knows you well they would be advised to ask you for proof of funds if paying cash or a letter from your lender if borrowing to buy. In Arizona we have specific forms the lender must fill out and its one of the first items brought up at the first contact with a sellers agent or buyers agent.

Its an unfortunate but true reality that many people out there are dishonest and its almost impossible to tell hence the request for proof of lender approval/proof of funds. Plus it also is a reality check for people who think they can afford home A, when really they can only afford home B. Isn't it wise to ensure you are showing someone a home at the right price point? Why show someone homes for $250,000 when they can only afford $125,000?

As for foreclosures, I haven't seen a single bank owned property where they do NOT want you to be pre-approved by THEIR approved lender. Even if you use another lender. Not only that, in Arizona at least, I do not know of a single broker who will accept an offer with out either a) proof of funds if buying cash or b) a pre approved loan amount if borrowing. You CAN'T view an apartment in Arizona without the showing agent getting a copy of your drivers license. For every property type out there, there is some vetting that occurs.
1 vote
George Milos, , Plano, TX
Mon Oct 12, 2009
There are many 'angles' to look at the request to have a pre-approval letter.
- When you submit an offer to any REO listing, you must attach proof of funds.
- Good deals are under contract fast - before you are able to get your pre-approval letter.
- Asking for a 'tour' of foreclosed homes without to convince the agent that you can qualify to buy, or you have the funds - could be a stretch for many agents, and they are going to work with people that are ready and able to buy instead of someone that will just look at foreclosures.
- If you ask to see a listing of mine: I will show it to you, but I will not give you a tour of multiple listings from other agents or show to you that distant listing without proof that you can buy it.

As a piece of advice: you should be able to provide a pre-approval letter within an hour.This means that you already had the application filled with the lender, and you know exactly how much you can borrow.
1 vote
Voices Member, , Benton County, OR
Mon Oct 12, 2009
JR

I do not think it is Wrong for an Agent to ask for a Pre-Approval....

I also do not think it is Wrong for a Consumer to consider that request when talking with an Agent and decide to choose an Agent that does not require Require a Pre-Approval to work with..Just as they consider Commission, other services ect...

I am merely stating that it is not a REQUIREMENT that a Consumer be Pre-Approved before an Agent shows them a property..

It may be the PREFERENCE of some Agents and just as you pointed out "Welll TP, we are all independent contractors and each agent runs their business in the way they prefer." they can decide to work with no one who does not get a Pre-Approval just as Consumers can decide not to work with an Agent that requires one.

Agents decide they will not work for less than or show properties to those who do not (Which is fine with me) and Consumers decide who they choose to work with
1 vote
Dallas Texas, Agent, Dallas, TN
Sat Oct 10, 2009
Few reasons:

a) Some bank won't accept certain type of loans THEREFORE lender approval letter might eliminate properties .
b) I receive close to 200 calls a month can you imagine if I or my team members ran out door everytime a person called wanting to look at properties DO YOU REALIZE how many people CAN'T qualify for a loan.
c) An agent who request a lender statement is a seasoned agent those who you want to work with than an agent unseasoned most likely could run out door show properties.
d) We have same practice in my office "show letter " we show you properties represent you

National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
Follow me on Twitter: http://twitter.com/Lynn911
Lynn911

http://www.lynn911.com
1 vote
James Gordon…, Agent, Hamilton, OH
Sat Oct 10, 2009
Tp this is something the Realtor® has hatched to weed out those that are not serious about buying. You need to look at it from the perspective of the Realtor®. Someone calls out of the blue and wants to look at forclosed properties. Is this Realtor® who makes no money going to invest time, effort, and money into looking at homes that you may never be able to purchase.
If you are serious you need to get a preapproval letter and be ready to write an offer. By the way current clients of mine have decided to go the cash purchase route. While waitng for the equity line to be approved on their primary home three target properties went pending.
These are solid buyers and I know that they have the reserves but they must be able to the lender proof of funds.
I have another family that I am working with where the son would qualify for double the purchase price that they are looking at. They want to get the loan in the fathers name to help his credit and the father needed to do some credit repair. The father needed about 30 days for a challenge to the credit reporting companies to take effect. The "perfect" home went pending while we were waiting.
Can you imagine what the Realtor® and you would feel if the property that you selected went pending while you were trying to get a preapproval letter?
When you are prepared to purchase a property including having a preapproval letter so that you can act on it you will find many Realtors® willing to work with you.
Web Reference:  http://www.Find1Home.com
1 vote
Pam Bava, Agent, Rochester, MI
Fri Oct 9, 2009
Hi TP
In this market today alot of the good foreclosed properties you are looking for probably don't stay on the market too long. It would only be in your best interest to have spoken to a mortgage person, see where you are with financing and how much house you can afford as well as make sure you can cover the closing cost before you begin looking at properties. It is not about someone insulting you when they ask for a pre-approval letter as a matter of fact you might need more then just a pre approval letter. But you need to be ready to purchase if you see something you like or it will be gone. Recently the last 3 foreclosed properties I put offers in on had more then one offer. There is no time to wait for a buyer to get qualified at that time and if you are working with an agent that has your best interest, they will make sure you have your financing in place to buy no matter if the house is $100 or $1 million.

Good luck!
Pam Bava, e-Pro, Realtor
1 vote
Margo / Marg…, Agent, Vero Beach, FL
Fri Oct 9, 2009
That is correct, it is not the Realtors who is requesting preapproval, it's a banks requirement. Since Bank is the owner, they have they own rules. They need to know if buyer is qualified, (to weed out those that aren't going to buy)., or those who are not qualify. And no reason to show propertie to buyer who is not going to cooperate when time come to make an offer. From my experience, they asking for prequal in Florida on properties that are less than 30,000., price does not realy matter. But Florida Law is different from law in other states.
Thank you
Margo
1 vote
Daniel, , Baton Rouge, LA
Sun Feb 12, 2012
Its more insulting to ask a realtor to show you a house if you are not ready to buy!

Do you go to the Mall with out money?? no you dont!

If and when you are ready buy, have your homework complete....get your pre - approval letter ready, then go shopping, otherwise

you are wasting other people time
0 votes
Yes Daniel you do go to the mall without money, its called window shopping, people should not have to be pre approved to go look at a house. if realtors think they are wasting their time showing a house because people are not pre approved, they should not be realtors. they are lazy realtors. i look at houses all the time i dont have any plan on buying and am not pre approved. but my realtor is not lazy she will show any house, i have sent 5 people to her and 3 have bought., i have 3 rentals myself, and i am still looking. ( not pre approved ) you guys say they are wasting your time, what about the pictures of houses you all put on your web sites. all the best shots of the house. not showing what a buyer really should see. but i guess its ok to waste the buyers time. i would not want a realtor like that selling my house or helping me buy one, could not be trusted
Flag Tue Jul 10, 2012
Rob Buffingt…, Agent, East Lansing, MI
Sun Feb 12, 2012
Tp, I can see where this would be frustrating as a consumer, but when dealing with a plethora of foreclosures on the market and just as many if not more consumers such as yourself looking for that amazing deal, this is the only way that us Realtors can determine who the serious buyers are and who the window shoppers are. However, with that said, I typically will show the first home to a buyer without a commitment such as a pre-approval, but after that I do request proof of funds or a pre-approval from a qualified lender. This approach I feel is fair for both parties involved. Hope this helps
Web Reference:  http://www.myrealtorrob.com
0 votes
Dorene Slavi…, Agent, Torrance, CA
Tue Aug 16, 2011
Dear Tp,
Contrary to popular opinion..Realtors are not tour guides, but trained professionals with responsibilities. We owe a feduciary responisbility to the owners of any property to bring only qualified buyers into their homes. It's not insulting, if you consider how you would feel if agents were bringing unqualified persons day and night into your home bothering you and your family.
Sad to say, but I have actually held open houses where "visitors" came by, as part of their Sunday outings and later went to a picnic! My open house was actually their days entertainment!
If a person is a serious buyer, they will have the necessary documents needed to purchase.
0 votes
Voices Member, , Benton County, OR
Mon Oct 12, 2009
Thank-you Tp it is very appreciated..............
0 votes
J R, , New York, NY
Mon Oct 12, 2009
Dunes, do you think it is wrong for an agent to ask for a preapproval?
0 votes
J R, , New York, NY
Sun Oct 11, 2009
Welll TP, we are all independent contractors and each agent runs their business in the way they prefer. Just think, you now have gotten your preapproval out of the way, and are in a position where you can put in an offer and move quickly. I recently lost a sale, we had an accepted offer and in the 3 days it took to get approval before we could get into contract (NO attorney will allow their client to enter into a contract without that preapproval) someone else came along and popped a higher number and they lost.
0 votes
Tp, Home Buyer, Saint Johns, MI
Sun Oct 11, 2009
. While I can understand the Realtors point of a view in not wanting to show homes to people who just want a tour. I find that in this market those same realtors would take a chance on showing those homes rather than losing out on potential clients or future clients. I can't believe that people would drive around from house to house to look at homes in this ecomony ; and with these gas prices just for fun. But what do I know maybe there are still people out there that do this kind of thing.
I am however, speaking only from my perspective; being that back in May my husband and I found a home that we were interested in and were told by the listing agent that we needed to have a preapproval letter just to see it. The house was an hour and 1/2 drive from were we lived. We got the preapproval letter only to find out that the house had major water damage inside that had not been disclosed in the listing. The damage was something we could not overlook and so we passed on the house. At that time we were upset to have ran our credit simply to take a tour of a home that we ended up not purchasing. Now here we are again still looking, we find a house that we like and are again told by a listing agent that we need to have a preapproval letter to view the home. After thinking about it I decided to call another realtor to show us the home, and get this they did not ask us to provide a letter. So I will be seeing the home this week, and if we decide to get it, the listing agent will have to split the commission that could have been the realtor's alone had he/she taken us to see the home. Again, i can understand the realtors perspective, but that really is the nature of the beast (that one may have to show 200 homes before getting an offer) I know that realtor's don't want to waste their time, however I am positive that their clients (the bank or other home owners expect and anticipate that the realtors will be diligent in showing these properties to ALL perspective homebuyers not just the ones with preapproval letters in hand.

As for hiring a buyers agent; I would prefer not to go that route for many reasons.

Hopefully we are all able to appreciate each others point of view.
0 votes
Bill Eckler, Agent, Venice, FL
Sat Oct 10, 2009
Tp

Right or wrong.......when dealing with "foreclosed" property, lenders will normally require all offers to be accompanied by a letter of pre-approval for funding. Banks will do this in an effort to identify the serious buyers and and insure that the lack of funding does not stand in the way of completing the transaction....and so do agent.
0 votes
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