7.6 Buyer Qualification Policy

Whether acting as an agent/loan officer of the seller or buyer, qualifying the buyer is a critical step in completing a property transaction. The Company strongly recommends that each agent/loan officer become knowledgeable, through company training and offered continuing education programs, about properly qualifying a buyer as to her/his financial ability to purchase a property. Financial qualification has two major parts, they are as follows:

1. Loan Qualification

If working as an agent of the seller and are dealing with a buyer, the agent has a duty to act diligently for her/his client the seller. Determining whether a buyer is financially able to purchase any property, ultimately your seller's property, is part of that diligent duty. While there may be times when financial qualification information is difficult to obtain (such as in the case of a buyer of a luxury home) the agent must take diligent steps to determine financial qualification. Some of these steps may include:

1. Securing a lender’s financial qualification form for the buyer to complete.

2. Setting up a meeting between a lender and buyer to discuss financial ability to qualify for a loan.

3. Providing necessary information to a buyer about property so that she/he can respond as to whether she/he can get a loan.

4. Request Proof of Funds

In order to help avoid a later claim that the agent/loan officer was acting as an undisclosed dual agent, an agent working with a buyer as a listing agent should take great care not to give the buyer the impression that the agent/loan officer is representing the buyer. If, in assisting the buyer with the loan qualification process, the buyer or any third party (such as a potential lender) attempts to disclose to the agent information of a confidential nature about the buyer’s financial condition, the agent should remind the buyer (or the third party) that the agent represents the seller and would be required to disclose any such information to the seller.

If working as an agent/loan officer of the buyer, the agent/loan officer has the same duty to act diligently for her/his client. In this case, however, the client is the buyer, not the seller. This approach changes the perspective of the seller's agent in that the buyer client has a right to expect that the agent will diligently determine whether a buyer can qualify to purchase a certain type of property. Some of these steps may include:

1. Completion of a financial qualification form. This form should be sufficient in detail and accuracy so that the buyer is reasonably sure of qualification. If an agent is not sure of her/his level of skill to complete such a form, the agent should get further education and training and immediately call the Manager or lender to assist.

b. Consultation with the buyer and a lender to determine financial ability to qualify for a loan.

The difference in the approaches between a seller's agent and buyer's agent is the degree of analysis. As the buyer's agent, you are required by fiduciary obligations to conduct a more "in-depth" analysis of the buyer and the buyer's circumstances.

2. Estimated Closing Costs

The second type of financial qualification which accompanies loan qualification (and in many cases is a part of loan qualification) is estimating closing costs. As in loan qualification, duties exist to the buyer and/or seller to diligently and accurately estimate closing costs. The Company has a policy of strongly encouraging its agents to become educated through company and/or board/association training and education about estimating closing costs.

Do not use rules of thumb such as 2-5% of the purchase price. The spread of costs is too great in such estimates to be sufficiently accurate. For a first time buyer with little cash, a one-half percent difference in closing costs can mean the difference between purchasing and not purchasing. You can request estimated fees from the settlement or escrow company.

Do not use computerized closing cost estimating programs unless previously approved and authorized by the Company. The programs may or may not take local costs and variations into account. In addition, the programs which allow for local costs may require that the agent input the costs. If the agent desires to use such a program, management of the Company will approve its use and review the local costs being input.

Lender closing costs are generally reviewed in loan qualification procedures. One note of caution is in order: Some lenders unbundle services and charge for each service. These so-called "extra" costs are in addition to origination fees and points. Other charges may include “processing fee", "underwriting fee", "document preparation fee", "courier fee", etc., which can total $500.00 or more on a single closing.

Whether representing a buyer or a seller, a lender should be asked what her/his "extra" fees are at the time closing costs are estimated and not at time of commitment or closing.