Amid fierce competition for customers, some REALTORS^® are going the extra mile to help buyers, especially younger or first-time purchasers, muddle through the often-complicated financing process.

service minded

Money Matters

How REALTORS^® can help demystify the financing process for homebuyers.

By Cheryl Winokur Munk

Amid fierce competition for customers, some REALTORS^® are going the extra mile to help buyers, especially younger or first-time purchasers, muddle through the often-complicated financing process.

REALTORS^® are lending a hand in a variety of ways, such as helping customers gain a broad understanding of different types of loans and programs that may suit their needs. They are also helping customers understand how much house they can afford — and counseling them when a particular property might stretch them too thin. Of course, REALTORS^® have to be careful not to delve into areas beyond their expertise — or alienate customers with their unsolicited advice — but many REALTORS^® believe that having a good understanding of financing and an ability to share that knowledge with customers is a critical part of their job.

“Our role is to educate people. When I get done with buyers or sellers, they know more about real estate and how it works than they did coming into the process,” says Don Bowman, CRS, a sales associate with Watson Realty Corp. in Middleburg, Florida.

While advising customers about financing is not their primary focus, REALTORS^® say it’s one of the many hats they wear throughout the sales process. “I’m here to sell real estate. But part of my expertise is helping buyers in every facet of their real estate transaction, from collecting the binder to financing to inspections to insurance,” Bowman says.

Know Your Customers

To give the best possible advice about financing, Tonyeil Spencer, CRS, broker owner of Spencer Realty, LLC in Aurora, Colorado, uses a detailed questionnaire to help her better understand customers’ broader financial pictures. Before customers get into her car to look at potential properties, she goes over information such as how much they have already saved for a down payment and closing costs, and how much they think they can afford.

Once she has a better understanding of their finances, Spencer talks to customers about various loan programs that are available and also gives them a broad overview of the basic requirements of several loan types, including conventional loans and city- and state-assisted programs. Based on their answers to her questionnaire, she matches customers with lenders on her preferred list. For example, one lender specializes in first-time homebuyers, one focuses on approving hard-to-close cases and another specializes in standard loans.

Spencer says she takes special care to make sure the short list of mortgage brokers she recommends to customers is current and carefully vetted. She interviews every lender she recommends, researches their company and checks their references. She won’t use lenders unless she’s had some business dealing with them from either the buyer’s side or the seller’s side and has done additional due diligence on her own.

Look Out for Red Flags

In addition to providing basic information about loans and helping customers to select competent mortgage brokers with whom they’ve had good dealings in the past, REALTORS^® say they play an important role in helping buyers feel comfortable with the financing process. Bowman says he does a lot of hand-holding, especially with first-time buyers, counseling them on the ins and outs of the mortgage process and how to determine what they can afford. “Most of them will feel much more comfortable with you helping them,” he says.

Although customers don’t always like hearing advice on what they can and can’t afford, Bowman believes it’s important to “push the envelope,” especially with young or inexperienced buyers. If a customer has trouble scraping together $500 or $1,000 for a binder, then it’s probably a sign he or she can’t really afford to buy something at this point, Bowman says.

Of course, REALTORS^® walk a fine line because if they push too hard, a customer could bolt. But Bowman says he wouldn’t be doing his job properly if he didn’t gently point out obvious red flags. “We’re the first line of defense, so to speak, with buyers buying too much house,” he says.

Setting Realistic Limits

When it comes to financing, REALTORS^® say there are limits to the advice they feel comfortable giving.

“We don’t have to give them lending advice, and I know many REALTORS^® who won’t because they’re afraid of the liability,”

Spencer says. “I give them a broad view of what their options are, but when it comes to discussing specific terms or programs, that’s where I refer them out because I’m not an expert in those fields.”

Harlan Mayer, CRS, principal broker with RE/MAX Equity Group in Portland, Oregon, believes REALTORS^® should help customers understand that when they purchase a home they’re buying two things: a lifestyle and a payment for that lifestyle — and explain to them that they should be comfortable with both and not be house poor. But beyond that advice, he believes it’s important to partner with trustworthy mortgage brokers and work together to create the best possible experience for the customer. “We are required to stay within our area of expertise,” he says.

According to Norman T. Koenigsberg, president and CEO of First Choice Loan Services Inc. of East Brunswick, New Jersey, REALTORS^® should be aware of financing options in order to provide their clients a high-level overview. When it comes to the nitty-gritty loan details, it’s best for them to have a trusted loan originator to rely on. Loan rates and programs change frequently, and lenders may have unique products or programs that distinguish them from their peers. REALTORS^® are busy enough as it is: It can be extremely challenging for them to stay on top of the latest offerings, he says.

“REALTORS^® are experts at what they do. We want them to understand the loan products that are available. At the same time, we hope to lighten their workload and have them rely heavily on trusted mortgage professionals to provide the latest on qualifications and details of the mortgage process,” Koenigsberg says.

Cheryl Winokur Munk is a freelance writer and editor based in West Orange, New Jersey.

Learn more by taking the CRS Course Financing and Tax Advantages for Agents and Their Clients.