Some think that the role of a real estate sales professional
is merely to represent buyers and sellers buying homes. However, one very
important aspect of this role is the financial aspect which is one that extends
beyond helping a buyer find a home and negotiating the process or listing a
client’s home.
The financial aspect of real estate transactions can
actually be sorted into 3 baskets:
1.
Your client’s ability to pay you
2.
Your client’s ability to obtain mortgage
financing
3.
Your client’s ability to afford to carry the
property that they want to buy
Aside from a client’s ability to pay you, the other 2
buckets sound somewhat like the activities of a mortgage agent or broker. Some
real estate sales professionals will simply recommend that a client go to their
bank or make a referral to a mortgage broker to secure mortgage financing.
Doing so leaves you dependent on a third party to make your deals happen!
Over time and using technology, you likely have become more
empowered as far as validating your clients’ financial ability to purchase a
home and pay you – this is especially important when clients are not as honest
as they could be - or when they forget information which is important.
Having provisions in your workflow that address the customer
financial profile makes you more competitive because you will close more deals
and not waste time on deals where clients can’t pay you or qualify for mortgage
financing.
How review your client’s financial profile in 1-2-3
1. Your client’s ability to pay you. This
boils down to the equity in your client’s home if they are selling or the
equity in the seller’s home if you are representing the buyer. In this regard
you will need to review any financial encumbrances against the property that
the commission will stem from. Using a tool like GeoWarehouse, you can run a
property search and reveal registered mortgages and determine if in fact the
equity is there. If you are concerned that there could be a lien you can go a
step further and request a Parcel Register* which will give you even more
information.
2. Your client’s ability to secure mortgage
financing. The same search of the registered mortgages on the property
should give you some insight into whether or not the client will be able to get
a mortgage – now this is at a very high level because most mortgages will also
depend on the client’s credit and income – but – 1) If the client has 2 or 3
mortgages, that is a sign that the client could have financial problems, 2) If
the client’s first or second mortgage is with a private individual it is a sign
that the client couldn’t obtain institutional financing at some point which
means there could be credit issues, 3) Equity – if the client has substantial
equity it will not be difficult for the client to find financing regardless of
poor credit.
3. Your client’s ability to afford to carry to
house they want to buy. For this we recommend that you have a mortgage
calculator on your smartphone so that you can swiftly calculate mortgage
payments for the client and then add them to estimates of utility costs and
other expenses to give them an idea of a property’s carrying cost. Consider an
app that offers a mortgage calculator that also tells you the bank’s daily
mortgage rates – RateHub is a good example of a website that has lots of tools
for calculating mortgage payments.
Real estate sales professional or mortgage broker – while
some of you are both, at least having a basic process for assessing the
financial aspects of the real estate transaction will make you more competitive
and close more deals.
* An official product of the Ontario government pursuant to
provincial land registration statutes.
