Some think that the role of a real estate sales professional is merely to represent buyers and sellers buying homes. However, one very important aspect of this role is the financial aspect which is one that extends beyond helping a buyer find a home and negotiating the process or listing a client’s home.
The financial aspect of real estate transactions can actually be sorted into 3 baskets:
- Your client’s ability to pay you
- Your client’s ability to obtain mortgage financing
- Your client’s ability to afford to carry the property that they want to buy
Aside from a client’s ability to pay you, the other 2 buckets sound somewhat like the activities of a mortgage agent or broker. Some real estate sales professionals will simply recommend that a client go to their bank or make a referral to a mortgage broker to secure mortgage financing. Doing so leaves you dependent on a third party to make your deals happen!
Over time and using technology, you likely have become more empowered as far as validating your clients’ financial ability to purchase a home and pay you – this is especially important when clients are not as honest as they could be – or when they forget information which is important.
Having provisions in your workflow that address the customer financial profile makes you more competitive because you will close more deals and not waste time on deals where clients can’t pay you or qualify for mortgage financing.
How review your client’s financial profile in 1-2-3
- Your client’s ability to pay you. This boils down to the equity in your client’s home if they are selling or the equity in the seller’s home if you are representing the buyer. In this regard you will need to review any financial encumbrances against the property that the commission will stem from. Using a tool like GeoWarehouse, you can run a property search and reveal registered mortgages and determine if in fact the equity is there. If you are concerned that there could be a lien you can go a step further and request a Parcel Register* which will give you even more information.
- Your client’s ability to secure mortgage financing. The same search of the registered mortgages on the property should give you some insight into whether or not the client will be able to get a mortgage – now this is at a very high level because most mortgages will also depend on the client’s credit and income – but – 1) If the client has 2 or 3 mortgages, that is a sign that the client could have financial problems, 2) If the client’s first or second mortgage is with a private individual it is a sign that the client couldn’t obtain institutional financing at some point which means there could be credit issues, 3) Equity – if the client has substantial equity it will not be difficult for the client to find financing regardless of poor credit.
- Your client’s ability to afford to carry to house they want to buy. For this we recommend that you have a mortgage calculator on your smartphone so that you can swiftly calculate mortgage payments for the client and then add them to estimates of utility costs and other expenses to give them an idea of a property’s carrying cost. Consider an app that offers a mortgage calculator that also tells you the bank’s daily mortgage rates – RateHub is a good example of a website that has lots of tools for calculating mortgage payments.
Real estate sales professional or mortgage broker – while some of you are both, at least having a basic process for assessing the financial aspects of the real estate transaction will make you more competitive and close more deals.
GeoWarehouse gives you the ability to do more – making your job that much easier and stopping questionable deals before they become issues. For more information, please visit http://www.geowarehouse.ca/marketing/index.php.
* An official product of the Ontario government pursuant to provincial land registration statutes.