Qualifying Buyers for Homeowners
Qualifying buyers for homeowners is serious business. What I am going to write now may be harsh but it needs to be said.
No home should be shown to anyone who is not able to buy it. No contract should be written or accepted from a buyer who can’t get financing. This is irresponsible and unprofessional behavior with horrible consequences for a seller. It does happen unfortunately.
Here is what I heard about recently:
A closing was cancelled 2 weeks before the sale because the buyer did not qualify for a mortgage.
A luxury home was shown to a buyer who is a fraud. Another was in contract before the buyer was found to be financially incapable.
A cash buyer wasn’t. He was getting a mortgage all along. As a result the quick closing the seller expected never happened.
A buyer didn’t admit he needed a co-signer until after Attorney Review.
The Effect on a Seller
When a home loses a contract, it rarely gets as much again. The home’s value has diminished in the public eye so offers that come in next are lower.
There is the cost of lost time because every day a home is on the market is a real cost to a seller.
There can also be legal expenses for a seller depending on how much work the attorney did.
Don’t dismiss the very significant cost of disappointment. This to me is the worst cost of all.
Both buyer and seller agents need to do their due diligence on every buyer and every contract. Beware of these:
Pre-approvals are often not real. It’s a semantic game some banks play. They define meaningless pre-qualifications as pre-approvals.
It is a pain in the neck to obtain a real pre-approval so a “don’t rock the boat” mentality sets in. Better to keep a buyer happy; work on it after you have them in contract. As a result mistakes are made.
Agents can be intimidated by high price ranges and rely on what a luxury buyer tells them. This is always unacceptable.
There are also frauds at the high end. I guess some just like to look at high end homes and others have more malevolent intentions. Either way you can’t let them in and you can’t write up an offer if you do not know for sure that they are legitimate buyers.
Here are some of my own recent experiences:
A man called me saying he wanted to buy a home at $5-7 million. Searching on my own I discovered that he lived in a 2nd floor apartment over a local store in Maine and was unemployed. My buddy who does forensic searches found that he’s been calling up agents all over the US for years pretending to be a high end buyer.
Another buyer wanted to purchase around $2 million. He had plenty of income but too much debt because he had so many investment properties. No bank would loan him.
I had to tell a young couple that they could not get a mortgage. These folks were “pre approved” by a website.
The Bottom Line
I meet buyers every year who have been “pre-approved” but can’t get a mortgage. I also receive contracts on listings from unqualified buyers. Because I’m so careful I’ve never had a homeowner lose a contract over financing.
Qualifying buyers for homeowners is indeed serious business. Don’t accept any offer unless you are sure of your buyer’s credentials. When you interview listing agents, quiz them about how they qualify buyers.
Call me at 201-741-8490 if you’d like to discuss this further or need help.