Wouldn’t it be advantageous if your clients’ noses grew when they were fibbing, just like Pinocchio? Seriously though? When a client misstates information on an application, this can result in an incredible amount of time and expenses wasted, and can even strain relationships with partners like your lenders, appraisers, real estate lawyers, etc.
It may be scary, but it is true. What’s worse, we hazard to guess that for every person who knowingly embellishes their information, there are several more who simply give you the number that they think is accurate and end up being off.
The most common things that customers incorrectly disclose are:
- Property value
- Registered mortgages
You see, with an applicant’s credit for example, most people generally know if they have good credit or not (you are either paying your bills on time, or you’re not). However, registered mortgages are a different ball game because many homeowners think they have paid down far more on their mortgage than they actually have. This is often a simple fix: by asking the client their mortgage rate and amortization and then checking the amount of the mortgage registered, you can then use a mortgage calculator to estimate what their balance would be.
What about mortgages the applicant doesn’t even realize they have? Often a homeowner will take out a line of credit (very common) and not realize it was registered on their home. Checking registered mortgages bears huge value and should happen as early in the process as possible.
The Canadian housing market has continued to boom and some cities have seen double digit year over year growth in property values. This can make it difficult for a homeowner to really know what their home is worth. This can bring reward and sometimes be a real pain. When a client’s property is worth more, it can mean an upsell opportunity. However, if it comes in lower, it can mean the end to your deal. Why have lingering question marks or wait until you have worked an application, gotten your deal approved and an appraisal has been ordered? You can leverage the same tools the banks do and generate an automated valuation model to get a quick range on your applicant’s property value.
We could compare liens to that single thorn on a rose. Sometimes applicants will try to get a deal through hoping that the lien will go uncovered, whereas others may not even know that a lien has been registered. Some liens are more detrimental to your deal than others. Even in A deals where a client has good credit, liens can pop up and stall or end the process. Income tax liens, condo fee liens and property tax liens can really cause an A lender to back up and reconsider a deal – even if your client can pay off the lien. Identifying a lien and speaking to your client before you start submitting a deal to lenders provides them with the opportunity to clean up the lien before applying for a mortgage.
A little bit of due diligence goes a long way in providing the best service to your clients and lenders. While you may catch a few Pinocchios along the way, the vast majority of applicants will appreciate working with a broker who is committed to seeing them get their dream home.
For more information about validating registered mortgages and checking a property’s value, please visit http://purview.ca/, and for more information about how to check a property for a lien please visit https://www.teranetexpress.ca/csp/.