As a new Agent I thought at first it seemed kind of offensive to immediately ask “Are you pre-approved for a mortgage?” or “Are you going to be an all cash buyer?” especially to someone who is looking at/for property you just met for the first time! First meetings are to be opportunity to gather as much information from your prospect, to know the types of property, I as the Realtor will show them. Isn’t “money” a taboo subject like discussing politics and religion?
I learned rather quickly, the question about the financial part of the real estate transaction definitely needs to be addressed much sooner than later and here is why; I had spent an entire Saturday (which is not unusual in this business) showing properties to a great couple when I finally built up enough courage to broached the subject of mortgage pre-approval.
One would expect a reply from the people you just spent the day with to tell you oh sure we have already been pre-approved our limit is $$$ or we are in the process. Nope that was not remotely what I was told, They told me that was way in the future and that they just wanted to see what was available and that they probably would get around to getting with a Banker in 6 months or so. I stopped a moment to process what I was just told hoping I misunderstood, but no I had not. That was Rookie mistake #1, of a few. The bright side that day beside spending the day with a truly wonderful couple, I learn how to use the lockboxes on 3 of the properties I showed them and they were 30 miles apart! The other positive about learning how to unlock the boxes is I didn’t waste anyone else's time but my own. All of sudden asking about mortgage pre-approval didn’t seem so rude or off putting.
I was apparently still a bit slow to learn from my mistakes as with my next adventure with a prospective buyer. I did ask about bank approval right away and was assured that would be no problem. We found a great vacation Condo for them and I was really excited to make the sale. After all I spent several months traveling to the various class locations so I could get my Real Estate License and it’s finally going to pay off! I got a signed Purchase and Sale agreement with the common clause that if financing could not obtained the sale would not go through. That of course wouldn’t happen they already told me they were pre-approved. Turns out the wife had great credit but the husband not so much and the mortgage was not approved and so the sale did not go through. This is Rookie mistake #2. The bright side here is I did learn how to write up a Purchase and Sales agreement and how to use electronic signatures.
Next up is a well qualified couple who wanted to buy a Condo with a rental office on site. They were well qualified for a conventional mortgage so I was finally going to get a sale. Condos with a rental office on site or a timeshare on site don’t qualify for conventional mortgages, so guess what? Yup, you got it, my buyers didn’t want to pay the additional rates that a portfolio mortgage requires so there goes yet another sale, bye bye. This was Rookie mistake # 3. I did however learn a lot about different types of mortgages and the different situations where they should be used because of Rookie Mistake #3.
All of these stories aside, my feelings are to have the client know what they are qualified for and how much time they have for their purchase. I believe when the buyer knows what they can and can't afford it makes the experience so much better better. There are no miss communications with showing a property out of customers range and setting up unrealistic expectations just to have their dream popped like a balloon that has been out all day in the hot sun.
So what comes first Realtor or Banker? I’m still not sure what is best but what I do know is that both need to work together to create a successful sale.The more the Realtor becomes familiar with the financing aspect of home sales the more satisfied customers and or listing clients he/she will have. The moral of this story for a Realtor is take a Mortgage partner to lunch or better yet have them take you to lunch and learn as much as you can. From a customers perspective, if you want a great feeling and successful outcome either go to you lender to become pre-qualified or seek out a trusted Realtor for guidance on how to begin. As for asking about pre-approval, I now ask over the phone before I even meet the potential buyer and if I’m not comfortable the knowledge of their finance, I inform them of a few we work with and confident in to get on their way for pre-approval. It only takes a few minutes of their time and don’t forget they are asking for hours of your time.