The Financial world has changed
And its about time I changed the way I do business.
I’ve been a Buyers Agent with RE/MAX since 2002. Since I am hesitant to approach new buyers to talk about their financing, I usually go on anecdotal evidence of my buyers solvency until the offer stage. After all I know they own a home, a happening business and they make XXXK a year between them and all they want to finance is 240K. So I would wait until the offer stage and then say “Oh by the way I need a letter from your bank ASAP.” After all, they are busy business people, they wouldn’t be wasting their time if they were not sure they would get approved.
New Day My Dear
This approach no longer works. Buyers who used to sail through mortgage approval are being shut down much to our wild eyed surprise. These are nice people who thought they were doing the right thing and surely didn’t mean to waste my time or their time. It simply got a LOT harder to get a mortgage.
So my casual, laconic attitude about pre-approval letters has to go.
In addition I need to discuss finances FIRST and in detail. As hard as it is for me personally to approach this subject with total strangers, I have to now or I will put myself right out of business with my lack of rigor. The financing must be discussed in DETAIL before we look at properties. The bank wants to know the whole story about where the down payment is coming from. Is it a gift? What is the source of the gift? What is the debt to value ratio? Will husband and wife both need to be on the mortgage and deed? Or just the Title for the property? If they use their 401 K, both must sign the deed as it is joint money. Are they a W2 employee? What percentage on there annual income is commission or bonus?
One new change to the Fannie Mae/Freddie Mac guidelines now states that if more than 25 percent of your income is from bonuses and commissions you are now considered self employed.
Buyers must now run a gauntlet to get that money.
Its like a campaign!
So to get started with my new process, I am changing the second letter I usually send that really spells it out. Here is an excerpt:
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“Although there is no charge for my services as I am paid by the seller, there is a new company policy in place that requires that you have a pre-approval letter from a bank stating that they will finance the plan you have in mind. Please tell them to be very specific as to loan amounts and down payments, gifts etc. This letter has to be in hand before we look at properties.”
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No doubt about it, this new paragraph is going to stop some buyers dead in their tracks, but it will also save me a ton of time working with buyers who are delusional, sociopaths or just plain crazy. I’m done running around showing properties to buyers who are either withholding the fact that they can’t afford the home or just don’t know that the bank will not give them the money.
Written by RE/MAX Destiny Accredited Buyers Agent Jeff Persons – 617-512-3443
More articles by Jeff:
The Boston Real Estate Market Has NOT Experienced a Recession
Boston Real Estate, A Recession Proof Investment
5 Clues That Your Boston Real Estate Buyers Agent is a Sellers Agent in a Brilliant Disguise.
A Boston Buyers Agent Says Skip the Spring Market, Wait Until Autumn
Dont Just Investigate Your Boston Condo, Investigate The Management Company Too
Return To WeSellBoston.Net
Buying Boston Real Estate, The Pre-Approval Letter Must Come First
{ 2 comments… read them below or add one }
My mortgage broker is now my best friend. I’ll spean one day showing homes in order to bond with my clients, after that, if you won’t make the effort to get prequalified, you’ve just disqualified yourself as a potential client.
But how has the market been for you over the last month or so? In April, Orlando homme sales were up 32% over April 09. However the median price was 11% below the median in 2009. Bank Owned and Short Sales still make up 2/3 of the transactions with bank owned properties being almost 50% of the total. Inventory is now at a 6.55 month supply with new bank owned properties metereing into the inventory in at a managable rate.
I like the way you put it ” if you won’t make the effort to get prequalified, you’ve just disqualified yourself as a potential client.”
It just has to be this way otherwise you are walking around with a sign on your back that says @%$#*& me please!
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