You work hard for your
clients and unfortunately you don’t get paid until your deal closes – often
from the seller’s equity. Also, if you are representing a buyer, your deal may
also depend on your client’s ability to get a mortgage.
These are two reasons
why some real estate sales professionals are left feeling vulnerable and
considering different methods to vet new clients. Nowadays, some even go as far
as to ask the client to provide a copy of their credit report.
In an extremely
competitive market, questions like this can leave a client feeling bad about
their experience with you. They may surmise that you have decided based on
their appearance or interactions with you. You also know, that in such a
competitive market, there is likely another real estate sales professional
around the corner waiting to snatch up your client.
So what is the balance
and how far should a real estate sales professional go to validate that their
client has the ability to meet financial requirements?
You might want to
start by assessing if your client is an existing homeowner. If they’re not, a
credit report may be your only way to vet their ability to be approved for a
mortgage (unless they have a large down payment). Or ask for a mortgage
approval letter from their bank.
If they are a
homeowner, leverage tools you likely already have access to, such as
GeoWarehouse.
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You can validate the number of
mortgages registered on title, the amounts they were registered for, the
presence or liens, etc…
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Then it is simple math. Take the
value of the home and subtract the estimated encumbrances and you will have an
idea of whether there is sufficient equity to cover the closing costs which
include your fees. Also, the presence of liens or a number of mortgages could
be a sign that you may want to look at a credit report to assess if it is
likely that your client can even qualify for a mortgage on their next home.
As you know,
especially in areas where the real estate market has been booming, a number of
homeowners have an abundance of equity. Massive equity = the ability to make
massive down payments which makes one’s credit standing much less relevant.
Validating this
information will enable you to identify deals where there is an abundance of
equity – meaning that there is little point in risking offending your client by
requesting a credit report, which should be your last resource.
For more information
about how you can validate the information provided to you by your client
please visit www.geowarehouse.ca or call 1-866-237-5937.
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