The Back story…
Yesterday I took a REO (stands for Real Estate Owned and is a property that a bank has foreclosed on and now has ownership) class taught by a Realtor who represents Miami and Miami Beach REO listings for the banks.
This class made me think a lot about people who call me at last moment’s notice and ask me to just run out and ”take them to see this property or that property” and then when I ask them to come into the office first to discuss their needs before previewing properties, they disappear.
Okay, I get it. I know that you can look up pretty much any property you are interested in on the Internet. You can call a lot of agents that will at a moments notice run out to show you whatever you want to see. I know people often think of a Real Estate Agent as the dreaded sales person and if you come into my office I am going to make you sign away your first born. It’s just not the case.
In today’s market, it’s more important than ever to have a good discussion with your agent and lender prior to looking at properties.
Good agents all work in different ways. Successful agents have developed successful systems to give their clients the best services and products available. Some times those systems may not always be so evident to your success or convenient for you in the initial stages, however in the long run, you will be glad that your agent took the time to make sure you were well prepared prior to previewing properties.
Another story…
Last week I had a potential buyer from New York call me and ask me to take her around to look at condos within a certain price point around South Beach. I told her that I would be happy to work with her but prior to looking at properties, I would like to first meet with her at my office. I discussed the importance of this meeting with her. I made an appointment and the next week when I called her to confirm she had already found another agent to take her around to preview properties without first meeting to discuss her needs.
I am not disappointed, it’s the nature of the job. I am working with quite a few buyers at the moment and it’s important that I work with buyers who are serious, know what to expect and have the financial backing to actually purchase a property if they like it. There is nothing worse than falling in love with a property and then find out that either (A) you cannot afford it or (B) the building will not meet the qualifications of the type of loan you were approved on. Plus what if I didn’t set that expectation up front and tell you that you needed to have this prior to looking at properties? You would assume that I have no clue what I am doing.
Ok, I hear you so what’s the point?
This is where the Pre-qualification and Pre-approval come in…
In today’s market, if you are a serious buyer, it’s more important than ever to speak with a lender or Aunt Edna with the cash. Whatever way you are planning to finance the purchase of your property, you need to know prior to looking at property how you are going to purchase it. ONE MORE TIME….. In today’s market prior to looking at properties you MUST know how you are going to purchase it.
Pre-qualification is not Pre-approval and vice versa.
A pre-qualification from a lender is an “informal” way of finding out how much you may be able to borrow based on your income and debt. It’s pretty much based on what you tell the lender. You talk to the lender, you tell him your income, debt, etc. The lender goes by the information you give him and then he will tell you what you may be eligible to borrow. It’s an “estimate”, it is not guaranteed.
A pre-approval is where you have to provide all of data in writing: credit reports, W-2 statements and more. The lender will verify all of the data. Once the lender determines what you are eligible to borrow, he will give you a pre-approval letter. This letter is important because it shows potential sellers and their agents that you have done the legwork and are serious about purchasing their property and are qualified to purchase their property. Know that there are also final conditions that the buyer, the condo and the building must meet in order for this to also have a final approval.
Why this is important in today’s market…
If you are looking at REO properties and are seriously considering a REO property, you will be required to submit a pre-approval letter with the offer. Obviously the bank wants to make sure that the offer they accept has a buyer that is qualified. An REO listing agent is not going to take a property off the market to wait and see if a buyer can get qualified.
For a regular property, depending on the type of mortgage you qualify for, the property and more specifically if you are in a condo building, the building needs to meet the criteria of the lender. Many buildings in today’s market that have unit owners delinquent in assessments and HOA dues will not meet the qualifications of certain lending criteria.
Why spend time looking at properties that you cannot purchase?
In Conclusion…
Spend time with an educated agent that will guide you through the process. It may not always be so convenient up front but in the long run it will make your buying process so much easier. Make sure to speak with a lender prior to looking at properties so you know what you can afford to buy as well as what type of building you can buy in. I have seen some amazing deals in our market, make sure you are prepared so that you can purchase a deal when you see it.
Like the old saying goes, “Luck is when preparation meets opportunity” or my saying, “A good deal is when preparation meets opportunity.”
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