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Buyer clients will often ask: Do I need to be pre-approved for a loan before I start house hunting? In a word, yes. Step one for most buyers is securing a loan, and it’s an agent’s job to educate buyers on the process.
My standard of practice requires all clients who are interested in purchasing real estate to have the following:
- Pre-approval and name of reputable lender we can contact
- Proof of funds to close if paying cash
This practice is the first step necessary to put clients in a strong buying position to reach their goals on the journey to homeownership.
Be the real estate agent who is willing to mentor the first-timer through the process so they understand the steps. You don’t want to be out looking for homes if they have not taken step 1: pre-qualifying for a loan. It’d be a disservice to your clients and to yourself, not to mention potentially a massive waste of time.
Why pre-qualifying buyers is crucial to your business
1. Time
We all have a certain number of hours in the day to take care of a number of responsibilities. Time is our biggest limitation.
By requiring documentation from the start, we make sure our clients are serious and prepared to succeed in the homebuying process. Our time with our clients is precious, and we want to make the best use of it.
2. Safety
There have been sad stories in the news time and time again involving real estate professionals and tragedy. It is against our policy to meet unknown potential clients without first verifying that they are real buyers. This keeps our sales associates safe and creates a mutually trusting relationship.
3. A standard of professionalism
It’s not in your best interest for anyone on your team to schedule showings or write offers on properties your clients do not have the ability to purchase.
Without the documentation required, we can not do our fiduciary and serve clients to the highest level. This is not a standard in all offices; there are agents who will open doors at a momentʼs notice.
We are professionals who commit our time, energy, resources and expertise to our clients. Because we are so committed to our clients, we need to ask for a mutual commitment at the beginning of the relationship.
Be a resource in helping your clients get pre-qualified
Provide a list of VIP lenders who have done a great job for your past clients. Encourage them to speak to at least three bankers and/or brokers, and explain the difference with each.
Make sure they understand their strengths and that they are the client. I always tell my clients this: “Take charge, tell the lender what you want and what is comfortable for you.”
How much money do you have for a down payment? How much are you comfortable paying each month? Knowing the answers to these questions will help you and the lender know what kind of buying power the buyers have.
Then buyers should listen and let the lenders educate them on the process.
Make a point to tell your clients not to give their Social Security number to anyone until they have made a final choice in the lender they are going to use. Every time one’s credit is pulled, his or her credit score goes down.
Pro tip
Your clients can get the information needed to determine if they want to use that lender if they know the following info:
- Income
- Assets
- Debts
- Credit score
Your clients can obtain their credit score for free once a year at Annual Credit Report.com, which is the only site that is directed by federal law to provide them.
Have a ready list of lenders who have worked with people you know or your clients. Encourage buyers to interview at least three. Offer to help set up meetings, and make phone calls while you have them in front of you to get the process started.
With a great real estate agent and lender as part of the team, buyers have the best chance at successfully finding and getting into their dream house — at the best possible price.
Leslie DeLuca is the broker-owner at DeLuca Real Estate in The Monterey Peninsula in California. Follow her on Instagram or her blog.
