Understanding is Key to Mortgage Broker/Realtor® Relationship
Like any relationship, miscommunication can be damaging. In the Mortgage Broker- Realtor® relationship, it can derail business completely.
One arena which seems to be at issue, seemingly, is court-ordered sales, as the conditions and processes for financing and purchase can be different than those of a traditional purchase. Unfortunately, if all parties do not enter into the deal with accurate information about what is needed, deals are often vulnerable to failure- which leaves a potential home owner broken hearted, and the Broker and Realtor® on either side of the deal, empty-handed.
As Kelowna Mortgage Broker Julia Krause told Propertywire.ca, she has seen heartbreak and disaster from court-ordered sales in her own experience. Job one, is understanding how the deal will go down, before you even leave the gates, says Krause- and that involves having accurate information about how a client needs to proceed in order to secure a deal.
“In B.C., when a person goes to court to make an offer on a court-ordered sale, the offer cannot have any conditions (or ‘subjects’). So if that person’s offer is accepted, they are legally bound to buy that property, and there’s no getting out of it.”
Fine and dandy if the client, and the team behind her are all on the same page, and are appropriately prepared, but tragically, much of the disaster could be averted by defining- and understanding exactly what is needed, specifically when it comes to the term “pre-approval”. Krause’s client found a condo via her Realtor®, that she had her heart set on. The Realtor® then gave the client some ill-fated advice: “My client’s Realtor® told her to ‘just get a pre-approval’ and then go to court.”
Krause says that this brought quick attention to the need to discuss this openly, so that all Realtors® were aware of the potential dangers. “Going to court with only a ‘pre-approval’ is very risky, because pre-approvals are not what they used to be and they are not a guarantee of being approved for actual mortgage financing.”
As Krause suggests, when the stakes are high, guarantees, where they can be found, are a necessity.
“In the ‘old days’ (pre-2004 or thereabouts) Mortgage Brokers used to submit pre-approval applications to lenders all the time, and the lenders would review the information submitted (credit, employment, income, down payment, etc.) and issue a pre-approval. But starting around 2004, lenders stopped letting underwriters spend time on pre-approvals, and started issuing ‘rate holds’ only. Now, when brokers submit pre-approval applications, lenders instantly issue a computer-generated ‘rate hold’ for that client (60 days or 90 days or whatever).”
And as Krause says, the lender does not generally review the application at all, until a deal is in the works- which is often fine for a traditional sale with a condition on financing, but for court-ordered sales, the client may be backed into a disastrous corner.
So for definition’s sake, in Krause’s experience, the pre-approval is really just a rate hold- and that is not what is needed in court. Krause says that frustration mounts on both sides of the deal. The Realtor® advises the client to put forth their best offer the first time out to secure the deal, which creates challenges and frustration for the Broker. The Realtor® becomes frustrated with the Broker’s reluctance to let the client go to court without a full approval, and so on.
The real twist to the problem, says Krause, is that the application will generally not be reviewed will ,which “has been a challenge because underwriters are not willing (or permitted) to spend any time on a file if there is no accepted offer in place yet.”
And so the cycle goes.
Krause says that, according to statistics, “full” pre-approvals became identified as unproductive: “The reason we can’t get pre-approvals anymore? According to the lenders, only 17% of pre-approvals ever become ‘real deals’, or completed purchases with funded mortgages. Pre-approvals were a huge waste of time for mortgage underwriters, so the lenders put a stop to it.”
No matter what side you approach the deal from, the client- and their interests rest in the middle. “Pre-approvals are not what they once were, and (it is not in a client’s best interest for) a client go to court with only a rate-hold. If the client gets the property in court, and then can’t get financing for whatever reason, well… the Realtor® and Mortgage Broker will blame each other, but it will be the client who is in a whole lot of trouble.”
What Krause says that this underscores, is the need and the connectedness of Realtors® and Mortgage brokers for each other. It is an essential relationship, and it helps all parties to have conversations that promote understanding.
“Realtors® and Mortgage brokers really need to understand each others’ roles better. We need each other equally; Realtors® need good Mortgage Professionals to close their deals, and Mortgage Brokers need Realtors® as a source of clients. Even though our roles are very different, what we have in common is that the client should always be our #1 concern.”
Editorial Team – Property Wire Canada
