Pre-approval, pre-qualification approval, approval of pre-qualification. How many different ways can non-professional lenders spin the word approval?
• Professional lenders ask the hard questions and do an honest evaluation of the prospect and use pre-approval and pre-qualification as it should be. You can feel fairly certain that after all the driving, phone calls, and offer writing that the deal will close. Professional lenders understand the loss to everyone if they fail to do their job upfront.
• Non-professional lenders take down what they are told and do a quick credit check and say find a Realtor and when you find a home write a contract and I will take it from there. They take a non-refundable commitment fee from the buyer and if they can pull off the loan great, but if they can't .....Next! They prey on the fact that if one Realtor is savvy enough to challenge them that they will be able to convince the buyer to contact another agent to "Hope and Haul".
When we challenge the approval or pre-qualification letter coming from an unknown lender we suddenly are the bad guys and the buyer normally jumps to the conclusion that we just do not want to work with them or we get something back from the lenders we know. We are the professionals in the process and we are suppose to ask questions to protect the client!
So what can we do? I know one thing it will not get better on its own and leaving it to the mortgage industry to improve on their own will never happen as long as agents let them get away with it.
I want to ask readers for your opinion on a possible solution to hedge against the non-professional lenders. If we work together maybe we can create a manditory process that will be the next paradigm shift on how Realtors hedge against bogus pre-qualifications and approvals and be the ones that improve the home buying process and mortgage process for our clients.
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What if it was a manditory requirement that the buyer had to be qualified by a lender you know before showing them property?
- I suspect in most cases the buyer if qualified will get a better deal and service because your team of lenders would be made up of the best of the best.
- We already ask for a pre-qualification with an offer. Why not ask for at least one pre-qualification from a lender that the buyer's agent knows and verify it before executing a contract?
Let's take control and stop letting the tail wag the dog!
I hear ya. Couldn't agree more. Thanks for the post.
THIS IS A GREAT POST. TWO YEARS AGO ALMOST ANYONE WITH A PULSE WOULD BE APPROVED EVENTUALLY BY SOMEONE, SO THE PRE-APPROVAL WAS ALMOST AN AFTERTHOUGHT.
NOW THE ONLY 'PRE-APPROVAL' THAT CARRIES ANY WEIGHT IS THE ONE GIVEN AFTER THE LO HAS RUN THE LOAN THROUGH DU OR LP. WHEN IT IS APPROVED THIS WAY, THE ONLY WAY IT CAN BLOW UP IS IF THE FIGURES PUT INTO THE SYSTEM DO NOT MATCH THE W2'S, PAYSTUBS, ETC....
IT COMES DOWN TO THE PROFESSIONALISM OF THE LO, AS YOU SAY. FOR INSTANCE, IF THE LOAN REP GOT AN ACCEPT/ELIGIBLE THRU THE SYSTEM BUT NEGLECTED TO INCLUDE A CHILD SUPPORT PAYMENT THAT HE SHOULD HAVE SEEN ON THE PAYSTUB OR DIVORCE DECREE, IT COULD INVALIDATE THE APPROVAL. GARBAGE IN, GARBAGE OUT. ITS INCUMBENT UPON THE LO TO ASK ALL THE RIGHT QUESTIONS. AS LONG AS THE LO USES DUE DILIGENCE, YOU CAN TAKE THAT APPROVAL TO THE BANK.
BACK IN THE 80'S, AT MARGARRETTEN WE HAD A REGIONAL MANAGER WHO TOLD US, "THIS IS THE ONLY BUSINESS IN WHICH THE REALTOR HANDS YOU HIS COMMISSION AND SAYS, 'PLEASE SEE THAT I GET THIS BACK AT THE SETTLMENT TABLE' ."
SORRY TO PUT A QUOTE INSIDE A QUOTE, BUT I BELIEVED IT THEN, AND I BELIEVE IT NOW.