Technology TransactionsHow Much Should The Seller Know Of The Buyer"s Finances?
Listing agents would love to know the intimate details of buyers" credit backgrounds. They can use that knowledge to help sellers compare offers, with credit-worthiness as the deal-maker/breaker. This information is equally useful to buyers" agents, who can use mortgage qualification to decide whom they drive around to view homes or not.
But there"s a reason why the buyer"s mortgage worthiness isn"t disclosed by mortgage brokers and lenders to real estate agents.
"When lenders, mortgage brokers or agents divulge credit terms about a borrower, such as disclosing interest rates, credit terms or conditions, they could very well be in violation of an army of Fair Credit and Privacy acts," warns David Reed, a director of Internet marketing for SouthTrust Mortgage. "I would be shot dead if I divulged anything about a client"s credit, even to my real estate agent."
Reed points out that the statutes of the Fair Reporting Credit Act on the consumers" right to privacy are very clear. Section 616 states severe penalties for willful and knowing noncompliance for misuse of consumer credit reports which include fines up to $1000, or actual damages, whichever is greater, and attorney"s fees.
Fines can also be directed at officers or employees of credit reporting agencies who provide unauthorized information from the agency"s files to a person not authorized to receive such information.
So what is permissible? "I simply must say "Yes, they can qualify" or "No, they can"t,"" says Reed. "I can"t say "Yes, they can qualify if they pay off their collection accounts," or that my clients" qualifying rate is 2 percent above market rates (which indicates a credit problem.")
So what can agents do to assure that the deal will close - without violating the buyer"s privacy or stringing the seller along?
Says Reed, "When there is an established relationship between both sides of the transaction, probably very little needs to be done. If a lender has a good reputation and the seller"s agent has worked with the buyer"s agent in the
past, just a standard preapproval is really all that"s necessary."
What if the agents don"t know each other or the lender? "If there is no previous experience with a lender or agent, or the seller just has the heebie-jeebies, the seller can ask if the credit report has been reviewed by whomever needs to make the credit decision, and if the credit meets the loan requirements," offers Reed.
Asking questions in the right way can also make a difference. "Instead of asking "Does your client have
bad credit?," ask "Does the credit profile meet the requirements of the loan?,"" suggests Reed. "Also feel free to ask if other loan requirements have been met."
Other questions sellers (via their agents) are permitted to ask:
Are the debt ratios in line with the loan applied for?
Are the funds used to close on this loan verified?
Have all Prior to Closing conditions been met?
The answers to these questions will tell agents all they really need to know. "And that is that the buyer can qualify for a mortgage," says Reed.