One of the most common home buying myths that exists is that when buying a home, you should find a home before getting a pre-approval. There are some real estate agents who will show a home, or several homes, to a buyer without knowing whether a buyer is pre-approved or not. This is a trait that you will find in an agent who likely does not sell a lot of homes.
Some of the most common things buyers say who do not want to get a pre-approval include;
- “I’m going to wait until I find the right home to speak with a mortgage company.”
- “I don’t need to speak with a mortgage company first, I’ll be able to get a mortgage, no problem.”
- “I’m just looking at homes right now.”
One of the most important things to first understand when buying a home is what the difference between a pre-approval and a pre-qualification is. Many buyers don’t realize the difference when in fact, there is quite a difference.
A top notch buyers agent will request a pre-approval letter from a buyer prior to showing them a home. There are many reasons why real estate agents request a pre-approval letter before getting in their car and driving buyers around town showing them homes.
Below are the top reasons why real estate agents will request a pre-approval letter before showing houses to a buyer. Read on to find out why this is common practice of top real estate agents before you get upset when a real estate agent requests a pre-approval letter before showing you homes.
Arguably the biggest reason a real estate agent will request a pre-approval prior to showing a buyer homes relates to the safety of themselves. REALTOR® safety has been a very popular topic in the news as of late. There has been in the past year several REALTORS® who have tragically lost their lives while performing their day-to-day tasks.
You may ask yourself, how does requesting a pre-approval letter provide any safety for a REALTOR®? If a buyer has been to a lender to discuss their mortgage options and has obtained a pre-approval, the lender has done their research on the potential buyer(s). The lender has information on the buyer such as their social insurance number, their job history, and other pertinent information.
Requesting a pre-approval from a buyer is one of the top REALTOR® safety tips that is preached by real estate professionals. If you’re in the market to buy a home and haven’t received a pre-approval and a real estate agent requests it, remember, one of the biggest reasons they are is for their own safety.
Provides Proof Of Ability To Obtain Financing
Another popular reason real estate agents request a pre-approval before showing houses to a buyer is because it provides proof of the ability to obtain financing. The reality is that not everyone can get a pre-approval. Real estate agents want to make sure that a buyer can get a pre-approval before spending their time driving around town showing houses to a buyer who cannot obtain financing.
Nine out of ten “serious” buyers will have no problem with attempting to get a pre-approval. Getting a pre-approval does not take a ton of time to obtain, in fact, a top lender should be able to pre-approve a buyer within a few days of receiving a pre-approval application.
Buyers who expect real estate agents to show them homes without being approved is one of the most frustrating thing. Buyers shouldn’t take it to heart when a real estate agent requests a pre-approval. A real estate agent who is showing homes to a buyer who hasn’t taken the time to get a pre-approval is actually just running a very expensive taxi cab and tour guide business.
Saves Time & Frustration
In today’s society, most people are very busy and don’t have boatloads of extra time. Another top reason why a real estate agent will request a pre-approval prior to showing a buyer homes is they are not only attempting to save themselves time but also the buyer.
A pre-approval provides a buyer, and their real estate agent, information as to what price range they should stay within as well as the range of yearly taxes. A real estate agent who requests a pre-approval prior to showing a buyer homes is trying to save the buyer time and frustration.
It makes absolutely no sense for a buyer who is pre-approved up to a $200,000 mortgage to look at homes that are listed for $300,000. There aren’t many homeowners who are going to accept an offer for $100,000 less than what they are asking for their home, period.
A buyer who works with an agent who shows them homes prior to getting a pre-approval is doing a disservice to them self. What can end up happening is they find out they cannot afford the home they fall in love with which leads to lots of wasted time, frustration, and also heartbreak.
Strengthens Negotiation Ability
Top real estate agents will request a pre-approval before showing a buyer homes because it strengthens the buyers negotiation ability. Depending on the local real estate market conditions, if a buyer is attempting to buy a home in a sellers market, it’s critical to have a pre-approval before looking at homes.
A buyer who has a pre-approval has a distinct advantage over those buyers who decide to look at homes without a pre-approval. If a seller receives multiple offers on their home, which is pretty common in a sellers market, they are going to select a purchase offer from the buyer who provides a pre-approval.
In order to win in a multiple offer situation, it’s paramount you have a pre-approval letter. Having a pre-approval letter is critical, but it also can matter which lender issued the pre-approval. In most cases, it’s best to get a pre-approval from a local mortgage lender and from one who also has a good reputation.
Sellers May Require It
Another reason why real estate agents will request a pre-approval before showing homes to a buyer is because the seller may require it. Some homeowners do not want buyers walking through their home who haven’t spoken with a mortgage company as they do not want to waste their time.
Some sellers also do not want unqualified buyers walking through their home, which is a common practice at real estate open houses. There are many pros and cons to open houses in real estate and certainly one of the drawbacks is there is no ability to screen potential buyers who are visiting an open house. Don’t be offended if a real estate agent requests a pre-approval before showing you a home as it maybe a direct request from the homeowner.
In addition to requesting a pre-approval from buyers prior to accommodating a showing, most sellers will also require a pre-approval with any purchase offer. A purchase offer without a pre-approval is only as good as the paper it is written on as it’s nearly impossible for a seller to truly know if a buyer will be able to obtain financing.
It’s important to note that even though a buyer may have a pre-approval, there are certain situations where a buyer can be denied for their mortgage even after being pre-approved. The likelihood of this happening is slim, but it’s important that buyers and sellers understand that a pre-approval is not a guarantee of funding.
Buying a home is a big deal. There are certain steps that need to be taken in order to be successful. A real estate agent who requests a pre-approval from a buyer before showing them homes is only attempting to represent the buyers best interests.
Remember, looking at homes without a pre-approval is silly. It is not only a huge waste of time for a buyer, but also the seller and the real estate professional. You will not find top real estate professionals spending countless hours showing homes to unqualified buyers or buyers who are not willing to get a pre-approval.
Credit: The Keith Hiscock Sold Team