For a new real estate buyers’ agent, one of the most delicate conversations may be the first time you talk about money. Specifically, you need to talk about the buyer’s financial ability to buy a home and how much house they can buy. There are two questions to deal with in this. When is the right time to bring up finances, and how do you help them achieve their goals despite financial challenges?
Before You Discuss Money
When working with buyers, you always need to have your realtor skills honed and ready. A part of that work may be your real estate agent training. Another set might be taking online real estate courses, like Roadmap to Success: Buyers. However, when preparing to work with real estate buyers, you need to take a few extra steps.
Educate yourself on the things you need to discuss, refer to, and consider when determining the buyer’s financial ability. That means knowing about current loan programs, the current interest rates in the market, and the entire prequalification and qualification processes. Finally, you must know everything you and the buyer will be required to do. After you have a good handle on everything, you will be ready to talk to buyers about this subject.
When to Talk to Buyers about Their Financial Ability
When to talk to buyers is easy to answer as a buyers’ agent. Do it early. In fact, you should start discussing finances before you even show them properties. You need to know before whether they can buy a suitable home. Otherwise, you could waste your time and theirs while getting everyone’s hopes for something that will never happen. Do yourself a favor: start this discussion as early as possible.
How to Discuss What the Buyer Can Buy
Determining exactly what the buyer’s financial ability is can be one of the most critical early phases of working with real estate buyers as their buyers’ agents. During the financial institution’s prequalification, they will answer questions like:
· What kind of loan can the buyer qualify for?
· How much can the buyer afford to finance the purchase?
· Will the buyer need some help from the seller with closing costs?
· Does the buyer have enough cash for closing?
With the lender’s prequalification, you can now help the buyer understand and decide several things.
· Tell them not to make changes that could affect their credit report until the purchase is final.
· Help them understand the different types of loans, such as fixed-rate, ARMs, balloon mortgages, government-backed loans, and jumbo mortgages.
What If the Buyer Doesn’t Qualify Immediately?
Sometimes, when working with real estate buyers, the buyers’ agent discovers that the buyer does not qualify immediately. Yet, in many cases, there is something you can do to help them go ahead and qualify without a long delay.
· Use state, local, and federal programs offering down payment assistance.
· Look for a seller willing to finance their sale to the buyer.
· Check for assumable mortgages.
· Ask if they can get help from a family member who will sell or cosign on a loan for them.
· Try lease with the option to buy.
· Suggest they consider a short-term second mortgage.
· Guide the buyer in choosing mortgage terms.
How to Deal with Credit Score Hurdles
Many buyers who come to you as their buyers’ agent may not have the best credit scores. In fact, the top of the scale – 850 – is probably rarer than you might think. While your buyer may not be at the bottom, in the 200s, it will be hard for them to get financing if their score is below 620. What if it’s stopping them from qualifying? Here’s how you can coach them to raise their score.
· Tell them to order credit reports at least once a year on a free website.
· Advise them to check their report for errors, such as bills showing unpaid that they have indeed paid. Then, they should contact the credit bureau with their evidence to have those bad marks removed.
· Strongly suggest that they pay off their credit cards as quickly as possible – monthly if they can.
· Recommend that the buyer waits at least a year to reapply for financing if their credit problems are severe.
· Warn them to avoid high-interest loans from finance companies.
The buyers’ agent can also guide them in making good decisions after they begin to search for a home again. For example, they should avoid using credit to buy things in expectation of moving to a new home. Opening new credit accounts doesn’t make sense now, either. Then, remind them that when they start applying for mortgages, it’s okay to submit applications of the same type during a short window of time.
All in all, talking to buyers about their current financial ability to buy a home doesn’t have to be a dreaded conversation. One of two things will happen. They will be able to buy a home they can be satisfied with, or you can help them get ready to do so. Either way, you can impress them with your helpfulness as a buyers’ agent and gain loyal fans and the referrals they send you.