Some clients may not be financially ready to buy, and agents should be prepared to assist
By Myrna Traylor
Occasionally, when prospective buyers approach you and say that they are ready to buy a home, they mean they are psychologically or emotionally ready to buy. But are they financially ready?
Agents who work with buyers have a responsibility to these clients—and to themselves— to make sure that they are, in fact, prepared to purchase a home. Ray Stallings, CRS, broker associate at D.H.I. Realty, Inc., in Mount Carmel, Illinois, says that some potential clients approach him and say they are ready to buy when what they are really looking to get is the lay of the land. Often, these are first-time homebuyers. “People may be seeking information, or they think they’re ready to buy because a friend bought recently,” he says. “But once you talk to them, you find out they don’t know a whole lot yet.”
Stallings takes care to plant the seeds for an ongoing relationship, however.
“I try to build a good rapport with them so when they are ready a year or even two years from now, I can revive a relationship with them.”
Charting a path
During the first meetings with prospective buyers, Stallings lays out what he calls his roadmap—the process that clients will need to follow, including sharing financial information, the details of the home search itself and all steps right through closing.
Pre-approved information: Ascertaining if the buyers are pre-approved for a mortgage loan is a vital first step. “I confirm that they’re pre-approved, but then I go beyond that a little bit,” Stalling says. “Just because you’re pre-approved for a certain amount doesn’t mean that you want to spend that much. You may not really be able to afford the full amount you’re approved for. This happened when my son was pre-approved. I told him—and I’m stealing this quote from Dave Ramsey, ‘You want to own the home, you don’t want the home owning you.’”
Lender advice: For those people who don’t have that pre-approval in hand, Stallings encourages them to talk to a lender about getting their financial house in order. “I don’t want to get too involved in their personal finances and be accused of giving them bad advice; that’s not really my lane. (Although I do tell them to avoid activities like taking out new lines of credit, missing bill payments, or moving large amounts of money around during the pre-approval process.) But I can refer them to different resources,” he states. “For instance, there’s a local credit union here that has credit counselors that can talk to prospective buyers, and often that person’s credit score can quickly improve if they take the advice.”
Stallings makes sure that he circles back to those clients who are improving their finances, if they don’t get in touch with him first.
No time to be shy
What if the client isn’t forthcoming about their finances? “It’s pretty rare that someone would try to hide that information,” says Stallings. “There may be some people doing that because I haven’t built a relationship with them yet. I may hold off on showing them anything or pass them off to someone else if they’re not willing to share anything. Or, I may go ahead and show one home or meet with them again for an opportunity to build a rapport.”
Stallings also says that new rules governing buyer agency agreements will weed out people unwilling to share their information. “With some of the new law changes, I think it will be easier to get some of that information upfront. In my state, we’ll need to have buyer agency documents signed before we show a house as part of our MLS rules, which will change things.”
Another force acting on buyer transparency is a note from listing agents saying they will only show homes to people who are pre-approved.
Related costs: A little further along on that roadmap, Stallings shares some of the costs that aren’t related to a home’s purchase price. “I have another document that shows three expenses you’re typically going to have after you make an offer on a home—the earnest money, the home inspection fee and the appraisal fee, unless their loan application fee covers the appraisal. At minimum, that is going to be around $1,500, but it could cost more. Depending on their circumstances, that number could be closer to $2,000.
“And then I explain the costs that are typically due at closing, which could be as soon as 30 days out. We also discuss the possibility of some of their closing costs being covered by the seller,” he says, “even if that weakens their offer.”
After they are approved: Once the initial financial hurdles have been overcome, Stallings tries to make sure buyers will be in a good position after the deal is done. “I hate to see someone use all their money for the closing costs,” he says. “Does that leave them something if they have an emergency? I do my best to make sure they’re going to be happy in the home and that they’re aware of all these different costs. If they’re first-time homebuyers, it takes a little extra time, but it’s definitely worth it.”
Learn how you can better support buyers with RRC’s Advanced Residential Home Buyers’ Agent Certificate. Visit www.CRS.com/education/certifications-and-certificates for more information.
Photo: Getty Images/porcorex
