In today’s hot housing market, buyers must show up ready to compete. Bidding wars are commonplace, and waiving contingencies—including for financing—is a tactic buyers are increasingly using to beat the competition. But financing is often the issue that determines how successful your client’s offer will be, says Kimberly Allard, ABR®, co-owner of Century 21 Professionals in Braintree, Mass. Sellers may be blinded by the numbers in the offers they receive, Allard says, “but those numbers mean nothing if the buyer can’t receive financing to back it up.”
That’s why buyer’s agents need to take a more active role in protecting their clients from financial setbacks during a transaction, which also will make them more competitive. After all, financing hiccups are the leading cause of contract delays and canceled transactions, according to data from the National Association of REALTORS®.
The Real Estate Buyer’s Agent Council wants to help prevent deals from souring due to avoidable financial mishaps. REBAC is launching a new course this fall to help real estate professionals guide their buyers through the mortgage process, identify and resolve potential financing obstacles, and provide resources along the journey. The new REBAC course, “Mortgage and Finance for Buyers,” will be offered nationally in September. The self-paced online version will roll out later this year. The course can be counted as an elective in order to earn REBAC’s prestigious Accredited Buyer’s Representative designation, which can help you elevate—and market—your expertise in buyer representation.
“I’ve always been amazed at how there aren’t any classes for real estate professionals about mortgages and finances,” says Michael “Smit” Smith, ABR®, a sales associate with Windermere Real Estate in Arizona and Washington and an instructor for the new REBAC course. Smith, a former mortgage lender for 18 years, says financing courses are too often conducted by loan officers pushing a particular product or service. Smith says he’s glad REBAC is filling the educational gap and helping to demystify the mortgage process at a crucial time when buyers need this information to succeed in a fast-paced housing market.
Buyers Are Looking to You for Guidance
Need more of a reason to take the REBAC course? Consider this: Issues related to financing were blamed for 21% of contract delays and 7% of terminations, according to the latest REALTORS® Confidence Index, a survey based on 3,500 agents’ transactions. Further, home buyers are more than twice as likely to contact a real estate professional than a mortgage lender when first considering buying a home, according to NAR’s 2021 Generational Trends Report. And even though financing is a key part of completing a transaction, many consumers are clueless about the requirements to qualify for a mortgage, including credit scores, down payment, and debt-to-income ratio, according to a 2019 Fannie Mae survey. Many consumers also are unaware of low down payment programs.
Most buyers rely on financing to purchase, and real estate professionals can play a vital role in verifying their clients’ finances and having the right information to back up their offers, says Allard, who helped develop the curriculum for the REBAC course. “We’re not lending professionals, but we should still be able to identify some of the pitfalls for our clients,” adds Allard, who also will teach the course. This skill also will make buyer’s agents “that much more of a force for their buyers in navigating the current market.”
The REBAC course will teach you how to guide your buyers through the mortgage preapproval process by, for example, creating a mortgage application checklist with all of the documents they’ll need. The course also covers resources for addressing low credit scores, alternative financing options like first-time homebuyer assistance or low down payment programs, and how to avoid the most common mortgage sticking points in a transaction. For example, the mortgage preapproval—not just prequalification—has become key for buyers competing against multiple offers in today’s market.
“There is a substantial difference between having a casual discussion with a lender and getting preapproved, where the credit score is pulled and assets and income are verified,” Allard says. A preapproval demonstrates that the lender is ready to offer financing and the buyer knows their housing budget, and it can be used in a bidding war to give sellers more confidence about getting to the closing table. And a buyer’s rep who’s well versed in mortgages can help prevent several problems that could stem from this process. For instance, a buyer may say they’ve been preapproved, but their loan could still be marked as “conditional” by the lender, Smith says. Additionally, buyers may be preapproved for what they wanted to spend instead of what their budget actually allows—which also could become a sticking point if they get caught in a bidding war and want to increase their offer, he notes.
“It’s important to also learn how to work with the lender as a partner in making sure your buyer is properly positioned for their loan,” Allard says. “Part of what we do as buyer’s reps is to make sure our clients are ready to compete in the market. In certain circumstances, they may be asked to waive certain things. The course will open your eyes up to the common pitfalls and the right questions you need to ask your buyer.”