Why does your Realtor require that you get prequalified as a buyer before showing properties?

Occasionally we hear buyers say that a Realtor would not “work” for them because the Realtor would not show them a house that the buyer just loves until there is a valid prequalification letter.  Actually the opposite thinking is correct!  A Realtor is “working for” AND “representing” their buyer very well by requiring a prequalification by a reputable mortgage lender before showing property.  We have even compiled a detailed list of the top reasons a buyer should be very happy that the Realtor requires a solid prequalification letter.

Top Reasons a Realtor Would Require a SOLID Prequalification Letter from a Reputable Lender

1. Limited credit knowledge:  Many buyers do not know their credit scores and what is on their credit report.  Knowing this information up-front prevents issues later that can be known now.
2. Erroneous personal credit knowledge:  Often there are derogatory items on credit the buyer didn’t even know about.  Almost every time we pull credit there are surprises good and bad.
3. Complicated guidelines:  Most buyers do not know mortgage guidelines such as how to calculate debt ratios, determine loan products available, reviewing credit report, among countless other areas.
4. Time & cost effectiveness:  The Realtor is taking time away from other work and spending their own money to show you properties.  Would you drive around to 20 properties in your car without proof of qualification?  If you would, I bet you wouldn’t do it long!
5. Focused home search:  The Realtor wants to show you homes that are in your prequalified price range that meet your goals.  Knowing your prequalified price range plus your comfort range will make a buyer’s search be more focused and less time wasted by the buyer, Realtor, and sellers.
6. Seller Courtesy:  The seller is frantically cleaning, organizing, and leaving their house open for you.  Would you want to do this for someone that just wishes they could buy your house but doesn’t really qualify?
7. Seller Confidence:  The seller more than likely wants to buy a house too so they are making an important decision based on your qualification and needs confidence in you.  If you were the seller, would you want your dream purchase to fall apart because you find out a week or even later that their buyer never qualified?
8. Reputation for your best deal:  The Realtor has a reputation to uphold.  A Realtor is hired by a buyer to negotiate with the sellers or their agent.  If the Realtor continuously brings unqualified buyers to other agents, it will hurt the Realtor’s reputation and ability to best negotiate for you.
9. Negotiating power:  It helps your negotiating power and helps you stand out among other offers.  A buyer wants the best deal and to capture the house he/she wants, so buyers should want to show as a “qualified” buyer with a high probability of closing assuming the appraisal, title search, and inspections are acceptable.
10. Your best interest:  Your Realtor wants to find the best home for your goals and qualification.  In the end the Realtor wants what is best for you and doesn’t want to waste your time or money.

Main Types / Levels of Mortgage Prequalification Letters

1. Basic verbal buyer information and no credit report pulled – Why would someone accept this?
2. Verbal buyer information and a tri-merge credit report – Better but still based on buyer verbal information.  At least the credit “should” qualify but the other items are not verified.
3. Verbal buyer information, actual income asset and credit documentation, and a tri-merge credit report – Best and what sellers and agents should require for the best outcome probability because tax returns have been reviewed, employment and maybe rent have been verified, as well as assets have been verified sufficient for closing.

Check out our next article called Understanding the Levels of Prequalification Letters

So next time your Realtor says “I need you to get prequalified for a mortgage before I show you properties”, remember that your Realtor is not picking on you and is actually looking out for your best interests!

Additional Resources:

• Why Using a Good Realtor is SO Important
• You Just Killed Your Mortgage Approval at the Last Hour! Solution: Be Boring!