Should Real Estate Sales Professionals be Requesting Credit Reports?
You work hard for your clients and unfortunately you don’t get paid until your deal closes – often from the seller’s equity. Also, if you are representing a buyer, your deal may also depend on your client’s ability to get a mortgage.
These are two reasons why some real estate sales professionals are left feeling vulnerable and considering different methods to vet new clients. Nowadays, some even go as far as to ask the client to provide a copy of their credit report.
In an extremely competitive market, questions like this can leave a client feeling bad about their experience with you. They may surmise that you have decided based on their appearance or interactions with you. You also know, that in such a competitive market, there is likely another real estate sales professional around the corner waiting to snatch up your client.
So what is the balance and how far should a real estate sales professional go to validate that their client has the ability to meet financial requirements?
You might want to start by assessing if your client is an existing homeowner. If they’re not, a credit report may be your only way to vet their ability to be approved for a mortgage (unless they have a large down payment). Or ask for a mortgage approval letter from their bank.
If they are a homeowner, leverage tools you likely already have access to, such as GeoWarehouse.
– You can validate the number of mortgages registered on title, the amounts they were registered for, the presence or liens, etc…
– Then it is simple math. Take the value of the home and subtract the estimated encumbrances and you will have an idea of whether there is sufficient equity to cover the closing costs which include your fees. Also, the presence of liens or a number of mortgages could be a sign that you may want to look at a credit report to assess if it is likely that your client can even qualify for a mortgage on their next home.
As you know, especially in areas where the real estate market has been booming, a number of homeowners have an abundance of equity. Massive equity = the ability to make massive down payments which makes one’s credit standing much less relevant.
Validating this information will enable you to identify deals where there is an abundance of equity – meaning that there is little point in risking offending your client by requesting a credit report, which should be your last resource.
For more information about how you can validate the information provided to you by your client please visit www.geowarehouse.ca or call 1-866-237-5937.