In the current environment, a lot of us start to do cartwheels when an offer comes in on one of our listings. Wooooo! Hoooo!
Let’s do it!
Yet, we are duty bound to protect the interests of our clients, The Sellers, and we do want to make sure the deal gets all the way to the finish line. So, we ask for some proof of the financial ability of The Buyers to complete the purchase. Pretty reasonable, don’t you think? But, how much information is too much information and what about the confidentiality that the buyer’s agent is duty bound to protect?
Is There Such A Thing As TMI?
We all know that most lender letters are pretty much worthless. Sure. There are good, reputable and honest lenders who have done a lot of the work necessary to really qualify a buyer for a mortgage. The two of you can go to the next post.
However, I’m not sure the listing agent has either the right or the need to request detailed financial statements showing occupation, income, assets and liabilities. So, I’m wondering how listing agents determine whether Buyer A is a safe bet. Yeah. I know, in the good ol’ days these detailed Financial Information sheets were de rigeur because people didn’t go to a mortgage professional prior to writing an offer. It was truly up to the listing agent to determine if the buyer had a shot at covering the nut.
Things have changed.
Most listing agents I encounter don’t consider a written offer an “offer” if it doesn’t have the requisite “pre-approval” letter (in quotes). Ditto the photocopy of a check written for an earnest money deposit. Forget that the lender letter may have been a fill-in-the-blank form or that the photocopy of a check is an optical illusion. It’s now part of the routine. Yet, some will still stomp their feet and require this detailed financial disclosure form. Is that crossing the line?
Do I really want to let the Seller know my clients have a million dollars in their retirement IRA if they have no plans to use it for the purchase? Does it matter that the buyer has just been on the job 3 months as the store manager at Best Buy or 3 months on the job as Under Secretary of State for International Development?
I realize the examples are pretty extreme but my point is that some information may be irrelevant to determining whether or not a buyer has the financial ability to make the purchase and the buyer has a reasonable expectation that their financial life will not be laid bare just to satisfy the whim of a listing agent or Seller.
So. Is there such a thing as too much information?
Doug Francis
November 10, 2010 at 8:38 am
I think a “reasonable” amount of information can include a little background, but unleashing social security numbers and birth dates is exactly what “Equifax” recommends you don’t do. If an agent requires a 1987 version of a Financial Disclosure Statement, then submit the offer without it but with the documentation you mentioned above (currently acceptable practice in your area), and if they refuse then contact their broker… or your broker.
REALTORS have a duty to present any and all offers to their clients and an agent drawing a line in the sand like this is grounds (in my opinion) for a formal complaint.
Ken Montville
November 10, 2010 at 9:55 am
Luckily, the Financial Info form we deal with was revised in ’09 and eliminated the spot for Social Security numbers. Still, it discloses a ton of information about the buyer’s financial condition that may actually hurt negotiations. How many sellers, realizing the buyer “has money” may actually harden their position on price or closing help when offering some concessions would help sell the house (the ostensible objective).
Sheila Rasak
November 10, 2010 at 9:04 am
Great points made in your recent blog! As a listing agent who works a lot of hardship cases here in California, I want to know that a buyer can perform. The only other piece of information I require to submit an offer to the bank in a short sale situation is proof of funds. The seller never sees this part of the transaction. My clients know that part of my job is validating the buyer so that their lender is comfortable with the offers we’ve received.
Ken Montville
November 10, 2010 at 9:57 am
That sounds like a nice process. I work mostly with real estate where the Seller has some equity and they’re the ones making the decision on accepting an offer. Some will accept the lender pre-approval letter. Some agents have been burned one time too many, I guess, with buyers who can’t really get the mortgage.