I got a sign call the other day from a buyer interested in my listing.  I listened to her and her needs, and then proceeded to ask her my customary questions when first talking with potential buyers. 

Her responses were:  1) No I’m not working with a realtor; 2) Yes, I have good credit;  3) I don’t know my FICO score, but I have good credit and cash;  4) No I haven’t talked to a lender; I don’t need to talk to a lender; I have more than enough cash; 5) Look, I know the process; 6) I might finance a small amount; 7) None of this matters; I HAVE CASH! 8) I just want to see the home!

Hate to break the news to you folks, but even if you are a cash buyer you still need to prove you have the funds you say you do.  Nothing is taken at face value.  If you are a cash buyer, you still need to show a paper trail.  My job is streamlining this process for you.  I’m preparing for when we start talking with the banks and sellers.  They will be asking you these same questions, even today when people think Cash is still King.  Yes, it’s hard to hear but true. 

Most buyers like putting the cart before the horse. Buyers want to start seeing homes before they know their true financial picture.  WRONG!  How much time do you want to waste looking at homes you may or may not be able to afford? Do you understand the costs associated with buying a new home?

You must know your financial picture FIRST.  If you are a cash buyer, then be prepared to prove to your Realtor that you have the cash you say you do.  As a Realtor I have found the more a buyer fights me on providing their Proof of Funds, the deeper the color of that red flag.  Some argue that it’s not a Realtor’s business to “know my finances.”  I don’t need to know every aspect of your financial life (that’s your lender’s job), however, I do need to know that you have the ability to buy what I’m showing you.  This comes in the form of Proof of Funds or a Pre-approval Letter from your lender that includes your FICOs.

If you are financing, it’s equally important to have a conversation with your lender before looking at homes.  The lender will determine what is right for your situation.  We have seen a number of changes in the lending industry.  Did you know FHA has changed its requirements for condominiums? Did you know Fannie and Freddie are also making costly changes in how they price their loans? Do you know how your income and credit affect the rate you may or may not be able to get?

Are you self-employed?  If you answered yes, then it’s even more critical you start your homework now.  Bonus pay, commission income – however you earn your living – you must know how the Feds are going to look at your income to make a determination on loaning you (and/or your spouse) money.  Often times, you will need to provide a detailed breakdown of your taxes/income for 3 years on self-employed income. 

Are you starting to see why it’s important to talk to your lender?  Cash buyers: Do you have Proof of Funds?

When you do your homework it makes my job that much easier.  I’m not trying to argue with you nor undermine your intelligence when I ask these initial qualifying questions.  Keep in mind: It’s my job to KNOW my job.  It’s my job to stay a couple steps ahead of the game.  Scrambling at the last minute on your dream home could cost you in the end — you might risk losing your dream alltogether.  It’s my job to ensure that does not happen!