I wrote a blog a while back called My prequals not good enough for you?. It was the first and only featured post that I have written so far. There were around 75 comments or so and many of them had the same tone. Many of you responded with something to the effect that Prequals are worthless, not worth the paper that they are written on. Still I am asked for prequals all the time. Many Realtors complain that they do not like prequals and that a lender or broker's prequal is worthless to them, yet they still continue to ask for prequals. I just qualified someone recently and I decided to skip the whole prequal process. I just sent over the actual approval that I recieved from DU (my findings). Wouldn't you know, I received a call moments later asking me for a prequal, the agent telling me that my DU findings have too much information and they need a prequal to present at the table when they make the offer.
Realtors hate prequal letters and yet they are a prerequisite for making an offer in many cases. Here's the thing; I can't decide whether to name this post My prequals not good enough for you? part 2 or Have you ever been burned by an agent?
I keep thinking about all of the responses to My prequals not good enough for you? that talked about the reasons Realtors have become skeptical regarding prequals. There seemed to be a general consensus that many Realtors have been burned by Mortgage Professionals. I read scenarios in the responses that talked about prequals that were written for borrowers who did not really qualifiy. I'm sure that many Realtors ran into this problem in the past. In 2004-2005 I'm sure that it was a daily event. You didn't have to know anything about mortgages to "sell" mortgages back then. All you had to do was have the ability to recite an interest rate and fee to a borrower.
I think that we can all agree that this is a self correcting market. When things fell apart investors lost their appetite for these types of risky sub-prime mortgage investments. A good portion of those Loan Officers who were writing the bad prequals have been weeded out of the business. They simply cannot close loans in this environment and even if they could, the mortgage types that they have restricted themselves to during the "golden years" are not currently being originated. There is no financial backing for these types of loans and as a result the dirty lenders writing the paper have all disappeared.
When I say that someone is prequalified I say it after I have thoroughly reviewed their credit and income and after I have run their qualifications through Desktop Underwriting (or LP, or DO depending on the loan type). When I send a "prequal" it is a good prequal and when I say a loan can be done it can be done. When I say that I will do something I do it.
Which brings me to the point of this post. Last month I had an agent come to me frantic about this sale that he had. He told me about how motivated the seller is and about how quickly I needed to get everything done. I worked very hard to get the deal done in a very short period of time (13 days start to finish). I was done my end before the contingencies in the contract from the sellers side were fulfilled. We got all the way to the finish line and the seller decided that he does not want to close. I got a Free rate lock extension but I am not sure if this deal will close or not, it is just sitting in limbo. My clients attorney is trying to force a closing and they are filing suit for specific performance.
I don't blame the agent, but it goes to show that mistakes can be made. The agent must not have had the repertoire that he should've had with his client or he did not interview him well enough to make sure that he was "prepared" to sell his home. This seems to me very much like a worthless prequal. In the same way that so many of you Realtors have been burned by Mortgage Professionals by way of a worthless prequal, I feel that I have been burned by a worthless contract. Had the agent taken information down on a form like I've seen many of you suggest he'd of built a better relationship with his seller and we'd of closed on the transaction.
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