In this column, Cody Kessler, branch manager of the Rockville and Washington offices of Real Estate Mortgage Network, discusses what sellers should expect of their listing agents when evaluating offers on their homes. This is the first of two parts.
In the current seller’s market, many properties are getting multiple offers. But the highest offer may not always be the best offer.The best offer, in many cases, is the one that will close on time.
It’s your listing agent’s job to accept only those contracts that have passed muster. If your listing agent does not take the time to properly vet the buyers’ finances and lender, in order to spot a mediocre offer, then he or she is putting you at risk.
Good listing agents know the best mortgage companies who employ experienced mortgage bankers and loan originators. Keep in mind that loan officers are salespeople who get paid for closing loans, and the majority should not be viewed as credible sources for buyer pre-qualification. A good way to research your loan officer is to check if he or she is a licensed loan originator certified by the Nationwide Mortgage Licensing System (NMLS).
Clay Wyatt, in a recent article on GoBankingRates.com, explains why the typical mortgage loan officer may not do a thorough job of due diligence. “As in any sales role,” writes Wyatt, “the (loan officer) is typically required to meet a certain level of ‘productivity’ — as in, sell a certain amount per month.” According to Wyatt, this puts the loan officer “under a lot of pressure to put the bank’s interests ahead of (the buyer’s).”
Initially, buyers’ pre-approval letter from the prospective lender is the only thing the listing agent has to go on in making a determination about whether the qualifications to obtain the needed financing are solid.
To make sure, your listing agent needs to go to the source. The listing agent may find that the loan officer has gone completely on representations made by the buyers about income level and credit score from an online application or over the phone.
Vetting an offer should start with a phone call to the person who signed the pre-approval letter. Those letters signed by a bank official with a higher level of authority, such as a branch manager or underwriter, are more credible than those signed by a loan officer.
In any case, before accepting a contract on a listing, the agent should call the signee of the pre-approval letter to confirm whether the bank is local or an out-of-state “consumer direct” division reachable by an 800 number; the loan officer typed and signed the letter; and a higher company official reviewed and approved the file.
The listing agent also needs to confirm that:
• credit has been pulled on all borrowers that would reveal any major derogatory credit events during the past 12, 24 or 36 months as well as any disputed items;
• tax returns for all required years have been provided, showing up-to-date filings and accounting for all unreimbursed business expenses; and
• all buyer funds needed to close, including gifts, have been verified.
Besides vetting the buyer, the listing agent also should scrutinize the loan officer. The listing agent should ask the loan officer if he or she has missed any settlements recently (and if so, why), and if the loan officer is able to ensure that the company can settle on time if you accept the contract.
Finally, this interview should establish if the buyers are ready to be approved today, or if any additional work needs to be done to get them there.
If there are gray areas in the file, then the listing agent should insist on receiving clear and definitive answers to these questions.