Bona Fide Buyer or Broke & Busted?

Many Buyers start house shopping without even knowing the price range in which they are qualified. At Sell Fast Realty, our company policy is that the Buyer must be pre-qualified by a Mortgage Lender and has already submitted all their financial documents so their debt to income ratio can direct them to the correct price range of homes. I get a lot of Buyers who have no idea if they can qualify for the price of the home that they want to buy. My Mentor Students and I use my Buyer information sheet to pre-qualify all of our Buyers.

1. Are they a Homeowner, Investor or Realtor?
2. Their full name, telephone number and email address.
3. What are their wants versus needs: how many bedrooms, bathrooms, and then garage/pool etc.
4. How much money do they have to put down NOW? (Notice the now, because they could be waiting on income tax refund, lawsuit or gift money etc.
5. How much can they afford monthly? I use this rule of thumb: If a house is selling for $100,000 then their monthly payment will be close to $1,000 principal, interest, taxes, and insurance (PITI). However with lower interest rates, then their payment would be lower).
6. Are they a CASH or Mortgage Buyer?
7. If Cash, then what is the price range they can afford? We would request a bank/IRA/investment statement showing this amount.
8. If they are a Mortgage Buyer, have they been pre-approved and for how much?
9. How is their credit? Good, Fair or Poor and what is their credit score?
10. Have they ever filed bankruptcy and when was it discharged (Chapter 7) or dismissed (Chapter 13)?
11. How soon are they looking to move and why?

Before I give information about the house that I am selling, I will ask these questions. If they are represented by a Realtor then I want to know if they are a CASH, FHA, VA or Conventional Mortgage Buyer.

Having a couple Mortgage Brokers on your side will help you qualify your Buyers. I will always send them a purchase agreement at the price and terms we agreed to and make it subject to my Mortgage Broker approving them acceptable to the Seller. This way, when a Buyer signs a Purchase Agreement they will stop looking at other houses even though the Seller hasn’t signed, in their mind, they have the house. I hate sending Buyers over to a Mortgage Broker and in the end they are told to do certain things in order for them to qualify for the house I have for sale. Because once they have done that, they move on to another house. By having the Buyers sign a Purchase Agreement, it keeps them emotionally and legally connected to your house and they STOP looking for another home. Many Realtors and Investors do not understand this concept, but as a Master Negotiator, I want my Buyers to only want my house and no other. Its just a mindset that I have created for my Buyers that the house is theirs, so look no more. In addition, if a Buyer is willing to sign a Purchase Agreement on a house, then they are considered to be serious, no matter if they are qualified or not. This removes them from the “suspect” category. I call this technique “Romancing your Buyers” so that you are always in front of them and they can start to envision themselves in the house you are selling.

First off there is a difference in having a Buyer qualified through a big Bank or Credit Union versus using a Mortgage Broker who has contacts with all of the Lenders to see what program the Buyers will qualify for, versus being denied by the Big Bank (Wells Fargo) or Credit Union based on their underwriting guidelines.

Before my Sellers/Student Partners would sign the Purchase Agreement for the Buyer, I will contact the Mortgage Lender and ask the following questions in order to determine if these Buyers are able to purchase the property.

1. How strong are these Buyers; what is their credit score?
2. Have they been employed in the same type of business for 2 consecutive years with no time off? (In other words, did they decide before changing jobs that they wanted the summer off)
3. The property is being FLIPPED. What are the guidelines based on your lender? Meaning how long do the Sellers have to own the property, which is referred to as seasoning. Will the Lender need a list of repairs done on the property, is there a maximum percentage that the Sellers can make as a profit and does this property require 2 appraisals to justify the price the Sellers purchased the property for versus the price they are selling the property at now?
4. Is there an exception to the rule? Meaning, are they counting gift money, took the summer off to enjoy life before starting the new job, had a bankruptcy or foreclosure etc. ANYTHING?
5. Did they fill out a 1003 Form which states all their financial obligations and their assets?
6. Did they receive the Buyers paystubs and tax returns? (Watch out for the Buyers who have a bunch of cash in their pocket because maybe they haven’t filed income taxes for awhile!)
7. Did they run them through Desktop Underwriting or Underwriting which automatically tells them that the Buyers should qualify based on the above information.
8. How long has the Mortgage Lender been doing this business?
9. Is the Mortgage Lender part-time or full-time? (One of my mortgage lenders waited tables at Applebees while being a mortgage lender).
10. How soon can they close?
11. Are they applying for a Florida Bond Program which normally takes 45 days to close and if the Mortgage Lender drops the ball even longer.
12. Do they need money towards closing costs or can they pay their own closing costs. (I had one Student Partner that couldn’t wait for me to find this information out and we lost $6,500 towards closing costs only later to find out that both buyers had 401ks with a boatload of money in their accounts and really needed NO help with the closing costs!)

Now is the Mortgage Lender allowed to tell me all the above information about the Buyers? Some do and some don’t and if I don’t get my answers from them, I will contact the Realtor and/or the Buyers and advise them that I need consent to talk to the Mortgage Lender so that I can present all the facts about the Buyers to the Sellers. I haven’t had any problems being allowed to speak with the Mortgage Lender, only one time, and what a wild ride that was with the Buyer!

Collecting all of the above information allows me to be the best Mentor I can be to help my Sellers or Student Partners sell their properties to these Buyers. I will ALWAYS ask for back up Buyers as no one gets paid until the deal is closed. So … DON’T STOP MARKETING UNTIL THE HOUSE IS GONE!!! Many Sellers, Realtors and Student Partners fail in this situation. as they think they have the Buyers or they pre-judge based on some of the information they obtained from my Buyer’s Information Form found in my Foreclosures Gone Wild Course. Remember, you are not the Mortgage Lender and there are lots of programs out there that can help people who had bankruptcy, foreclosures, or poor credit, so let the Mortgage Lender do their job.

Always, and I mean always, read the pre-approval letter that you received from Buyers’ Mortgage Lender as it could say “subject to collecting all their financials” versus “subject to the house appraising.” And always call the Mortgage Lenders and ask the questions prior to signing the Purchase Agreement, as you could be giving your money or our money away when it is not necessary.

Having a Mentor/Partner review all these things about your Buyers and help you make the right decisions pays for the Mentor alone! Recently, I just saved my partners and me over $7,000 worth of money that was requested by the Buyers to help them with their closing costs. After speaking with the Realtor and the Mortgage Lender, I was informed that she does not need OUR money and that if she needs any more money, that her mother that is going to live with her will give her a gift letter/money to purchase the property.

In other words, slow down to romance your Buyers and as you do, you will make thousands and thousands of dollars versus not even asking the questions or countering the offer to see how the Buyers respond. My May and June Trainings are coming up and this is one of the many topics that I teach you. Taking 5 Days out of your life with me will make you thousands of dollars, as I make sure before you leave my training with ALL of the answers to ALL of your questions and I will hold your hand every step of the way. Save the cost of flying to my training and check out my online training at www.foreclosuresgonewild.com/online where you can download everything from the Home Study Course System, all cds, forms and dvd, the 3 Day Live Event with 19 cds and the 2 Day Live Negotiating System with 9 cds. Also stay tuned for updates for my online Mentor Program that teaches you to buy, fix, flip, hold, lease option, subject-to, short sales and more!!!!

Thank you so much to all of you who continue to send me your questions and topics that are most helpful for you to read about. Your Success is important to me, so let me know how I can help!!!    

Happy Negotiating!

Kimberlee Frank