Powerfact: Real Estate Buyers, if truly committed to buying, will find a way to come up with the money. As top real estate agents, it’s our job to show them their options.
With homes selling for well above listing price, it’s getting more and more difficult for buyers (especially first-time buyers) to get into a home.
So, what do you do when you find yourself in a situation like one of our Power Agents® did when she had a buyer who wanted to purchase a two-family home, but only qualified to purchase a single-family house? This buyer was planning to get help in purchasing this larger home, but how do you help this client when you suddenly have a co-signer in the mix?
First Things First
I always recommend having buyers talk to a mortgage-broker to get pre-qualified, regardless of whether they have co-signers or not. In our Power Agent’s® case, the buyer had bad news: She didn’t qualify for the $800,000 property, they only qualified for a $300,000 property. As much as this agent tried to steer the buyer to properties she was qualified for, the buyer reiterated that she was getting help from a co-signer and wanted to continue looking at the more expensive places.
It’s All About Finding a Balance
I interviewed an amazing real estate agent, Robert Slack, who found himself at 66 years of age and forced into starting over. He got his real estate license, became a broker a few years later and in their first year of business, had 40 agents involved. Now, he has over 500 agents in his company, and is an astounding success in his 70’s. Talk about a real estate success story!
He and I have a very similar philosophy when it comes to buyers – buyers aren’t necessarily defined by their mortgage pre-qualification.
Look for Their Commitment
If a buyer is really committed and serious about buying a house they really love, they usually manage to create miracles and find the money to get into the house they really want. However, there is a fine balance here, because you can end up wasting a lot of time with buyers that can’t or won’t pull through, but in my experience, somebody who is really truly committed can make it work.
The Three Types of Lenders
There are three types of lenders that I have had experience with: The lender that required a buyer with a perfect FICO score and good income, the creative lender who could help a buyer that wasn’t in the greatest financial shape to get into a home, and the lender named Vinnie who had all the money in the trunk of his car, and his interest rate was 25%. (I wouldn’t recommend him!)
Going back to these buyers pre-qualified for $300,000, they have a couple of options that will get them a higher mortgage rate, and the more of these they have, the better:
- The income rent roll from that second property
- A good to great FICO score
- A large down payment
- A co-signer to join them in the purchase of the property
Partnering with a Co-Signer
When it comes to your buyer going in together with another person (or several people), there are a few things to keep in mind. As a real estate agent, you would need to get a hold of their credit rating, their income, their FICO score, and the amount of their down payment, just like you do with your buyer. This can either be a good thing, or a bad thing! If the co-signers have terrible credit history, or less income than your buyers, having co-signers will NOT help your buyers.
In this article by mortgageloan.com, they explain the benefits and pitfalls of buying a home with a co-signer.
If the lender side only qualifies this buyer for $300,000 but this buyer is adamant that they don’t want to buy what they qualify for, but buy the two-family $800,000 house, then this is what you can say to them:
“The only way this will work is to have other people to go into it with you, and then we have to include them in the paperwork, check their credit, check their income, and so on. If you can’t buy this property yourself, then I will need to work with everyone, not just you. I need to meet with them, get them pre-qualified, and so on, so I will need to go through this whole process with these other folks.”
If this buyer isn’t willing to give you all the names of the people who will be going into this property with them, or they are not willing to participate or unwilling to contact you, then it’s possible that this buyer wasn’t really serious about having other co-signers, and if the buyer doesn’t have those, then they will have to either find a co-signer, get a larger down payment, or shop for a home within their means.
Are you ready to start taking things to the Next Level®?
Power Agents®, check out the wide selection of flyers and eGuides in the Buyers tab of the classroom. Whether you need to coach your buyer on the pre-qualification process or help them prepare to move into their new home, this tab has everything you need!
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