Buyers Beware: Open House Survival Guide
The danger of window shopping at an open house is that you could fall head first into an unintentional trap.
Buying your first home is already going to be a journey, failure to have a purchase plan could make you susceptible to serious challenges throughout the process.
Buying a home is not something you do like you’re picking up a pack of gum, or breath mints in the check-out aisle at the grocery store. But sadly, some buyers get coaxed into a situation where the desire to buy is greater than the patience it takes to do it right.
Open Houses are also a great way to see what’s typical for the neighborhood, and they are also a way to subject yourself to the polished sales tactics of a seasoned Real Estate sales professional.
An Open House can be an open pit if you walk in un-prepared, and are swooped up by someone whose intention is to take over the rest of the sales process from here.
I received an email last week that inspired this article. We thought it was a good opportunity to possibly share the experience of another reader, to hopefully help someone else that might find themselves in this situation.
Making Educated Decisions
The biggest risk when unexpectedly encountering one of the above mentioned seasoned sales professionals is that you may find yourself suddenly and inexplicably seeing one path, and one path only to the home of your dreams. And that path starts right here, right now. That’s effective sales!
If there is one thing that I hope to accomplish with this website, and this article, is to empower consumers by helping you to make more educated decisions during the home buying process.
I don’t have anything against a “Professional” that is eager to earn your business, there’s absolutely nothing wrong with someone trying to make a living.
However, if you succumb to the pressures of an attendant of the Open House, you’ve now possibly given over the control of the decision making process to someone you’ve never met or spoken to, for the most important purchase of your life.
Preparing for an Open House
As a best practice, you never want to go to an Open House Unprepared.
Being coaxed into making an offer while at an Open House is an aggressive game of Salesmanship that is designed to take the decision making process out of your control.
Being prepared, and Pre-Approved, puts you in control of the Sales Process, empowering you to make educated, well thought out financial decisions.
Being Prepared for an Open House Means:
- You have interviewed and hired a Real Estate Agent you trust
- You have interviewed and hired a Lender you trust
- DO NOT go to an Open House without your Agent
- DO NOT begin looking at Homes for Sale without a Pre-Approval from your Lender
What is a FULL Pre-Approval?
A solid Pre-Approval means completing a home loan application (also called a 1003), and having all of your supporting documentation reviewed for consistency. Your lender should also provide you with at least the front page of an automated underwriting determination.
The Automated Underwriting Determination can also be called DO, or DU. DO stands for Desktop Originator, DU stands for Desktop Underwriter, which are both the same online, Automated Underwriting System created by Fannie Mae. This is the standard for the Mortgage Industry.
A Pre-Approval is only as good as accuracy and recency of the application and supporting documentation. Any lender can manipulate DO or DU to produce an approval when the loan is not yet actually approved.
A sure sign that you might not be approved is if you have not provided your lender with any of your supporting documentation, and yet they claim you are Pre-Approved.
You can have a high level of confidence that your Pre-Approval is accurate if you’ve provided, or completed the following:
- 2 to 3 Years Complete Tax Returns with all Schedules if you Itemize – IRS Form 1040
- Last 2 Years W2 Earning Statement from Your Employer
- Last 30 Days Pay Stubs for all Borrowers
- Document liquid assets to cover down payment & closing costs
- Complete a Home Loan Application (form 1003) either in person or online
- Have an experience mortgage professional analyze your credit and supporting documentation
- Automated Underwriting System – DO or DU approval supported by current documentation
Understand the Process
The challenge that comes from working with a lender that has never met you before while the escrow clock is ticking, is that you have very little time for delays or surprises. Not to mention the time make corrections if you determine that your lender is unable to meet your financing goals.
If your lender does not walk you through the process so that you completely understand the difference between what you qualify for, and what you want your payment to be, this might be a “Red Flag” to warn you that challenges may be in your future.
Your lender should also be able to discuss timelines, contingency removal prerequisites, challenges and opportunities that can come up during the escrow period before you.
In a typical purchase transaction, everything has to happen in approximately 30 days or less. This requires that you are well prepared with your Buyer Agent and Lender, and everyone is on the same page and communicating without issue.
I know this isn’t going to be a popular topic for my Agent & Lender friends, I get it, you’re trying to run a business. But allowing a previously unapproved prospective homebuyer to make an offer at an Open House is unprofessional, irresponsible, and a clear act of putting commissions before consumers.
If you are trying to buy a home, and you find yourself in a situation where you are at risk of losing your earnest money deposit because your Lender is unable to either approve you, or meet the contingency deadlines, we’re here to help.
Simply leave a question or comment below, give us a call and we will do our best to get you back on track, and in a position to buy the home of your dreams!