How to Make Loan Pre-approvals Work in Your Favor

March 05 2013

handshake skyAgents, have you ever had this happen to you? An enthusiastic would-be buyer calls you up, eager for you to show them a certain property. "I'd love to help you out," you might reply. "Go ahead and send me a copy of your pre-approval letter and I'll get in contact with the listing agent."

Did the mere mention of the word "pre-approval" stop the conversation dead in its tracks? Perhaps the caller was just an inexperienced buyer, or they were a lookie-loo. Regardless, no agent should waste their time on prospects who are not pre-approved for a mortgage.

Consumers with pre-approvals in hand are serious about purchasing a home. As an agent, your time is precious. You should be spending your time with the prospects most likely to result in a completed transaction.

However, don't think of unapproved buyers as a hassle--think of them as an opportunity. By tying the pre-approval process to the signing of a buyer representation agreement, you come out ahead--and with a qualified new client!

Here's how.

Ease Your Prospects Into the Process

Begin the process by meeting your prospects at your office first. Have them fill out a buyer questionnaire so you can get to better know them and what they're looking for in a home. Explain why pre-approval is important. For example, if they were selling their home, would they want unqualified strangers touring their property? Probably not.

It's also important that buyers are pre-approved so that neither party wastes time viewing properties that are not financially feasible. To ease your buyer into this, use a tool like RatePlug that streams live lending data into the MLS in order to show monthly principal and interest loan payments on properties of interest. RatePlug will also display monthly real estate taxes, insurance and association fees to give your buyer an accurate estimate of what their total monthly housing payment would be for any given property.

By providing realistic loan information to your sellers tied to specific properties they show interest in, you are helping them envision what their future financial situation would be like with a mortgage on a home they desire.

Two Birds, One Stone: Pre-approval and Representation

Once you've gotten your prospect comfortable with the idea of monthly mortgage payments, it's time to start the pre-approval conversation. In order to secure your prospect as a client, have them sign a buyer representation contract as part of the pre-approval process.

To ease fears, let your buyer know that confidentiality is a standard part of the buyer representation agreement, and that any sensitive financial information involved in the pre-approval process in protected under that agreement.

Next, draw upon your trusted lender contacts. Some agents invite lenders to their office to meet with buyers face-to-face. Others may act as an intermediary between lender and buyer.

Whatever approach you take, try to make the process and painless and simple for the client as possible. Make the representation agreement available for signing electronically. This is easily accomplished by using zipForm and DocuSign. The client can sign the agreement using your iPad in your office, or on any device from wherever is most convenient for them.

As you can see, lack of a pre-approval is not a hurdle, but a stepping stone to a beneficial business relationship. What other pre-approval strategies have worked for you? We'd love to hear your stories in the comments section below!