Successful real estate sales is becoming more about preventative medicine - not whether you can sell the home but whether you can prevent the sale of the home from falling through.
One of the biggest pitfalls in a transaction is the lack of preparation by the buyer toward qualifying to buy the home. Key to getting the nod from a lender are credit scores. Pioneered by Fair, Isaac, and Company, the creators of "credit scoring," credit scores impact more than 75 percent of loan approvals. The earlier in the transaction that the loan is approved, the more likely it is to close on time.
"Since 1989, lenders have used FICO scores to help them make credit decisions," explains Craig Watts, consumer affairs manager for Fair, Isaac, and Company. "It is based on information in credit report from three national credit bureaus. They collect information on 150 million consumers. Our scoring system allows credit bureaus to produce a three-digit number that is between 300 and 750. The higher the score, the better likelihood you will repay the loan."
Surprisingly, the median consumer score is about 720.
"Most people have excellent credit ratings," notes Watts. "They are probably risk-averse, and they always pay their bills on time, which produces high credit scores. The people who are exciting in their use of money have lower scores. The scores look at behavior."
Unfortunately, the hapless Realtor is unable to tell at first glance whether his or her client has a low or high credit score. While some may argue that it is none of the Realtor's business, it could also be successfully argued that the client has the right to know as early in the transaction as possible whether he or she may have a credit glitch that could affect the terms and closing of a loan.
That's why the National Association of Realtors is REALTOR VIP partners with Fair, Isaac, and Company to educate Realtors and consumers about the importance of credit scores to securing loans and closing transactions.
"We are very excited about this opportunity for members to be able to help the consumer have as much information as possible about their financial credit position to aid them in their home purchase decisions," says Bob Goldberg, NAR senior vice president of marketing and business development, and head of the REALTOR VIP program.
The partnership is implemented under MyFICO, a consumer division of Fair, Isaac, and Company, where the NAR has partnered with Fair, Isaac, and Company to put a special page devoted to NAR members and their clients.
The NAR page will offer four things to Realtors:
- A discounted version of MyFICO credit scores to NAR members for their own personal use
- An educational Webcast that explains FICO scores, their role in the mortgage process, and what steps home buyers should take to get their credit health in the best shape possible.
- Downloadable educational content that Realtors can use on their Websites, e-newsletters or in mailers
- Discounts on gift purchases of credit score packages for clients
One of the benefits Fair, Isaac, and Company is looking forward to in the partnership is that Realtors will be educated about credit scoring and will assist in the debunking of certain myths about credit scores.
"The biggest myth is that if you look at your report that you will hurt your score," says Watts. "We encourage consumers to look at their credit report at least once a year, and check to make sure the information is accurate and to take the measurement of their score so they will know how lenders will view them."
He says, "Realtors are in a marvelous position to guide consumers at the earliest stage of homebuying to fully understand what lenders will require of consumers. The consumers will have time to check their credit scores before applying for the mortgage. One problem consumers have is they don't learn about scores before applying for a loan and they may be surprised to learn that their scores are too low to qualify them for certain loans. When Realtors understand how that can impact the transaction, they are in a better position to pass that knowledge along. Realtors dislike spending large amounts of time showing consumers homes and finding that their credit rating was too low to help them get the mortgage to buy in that range. It is much better for all concerned if the consumer understands going in what their credit profile is to shape their expectations in their homebuying search and their interaction withe the Realtor."
Published: October 10, 2002
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 Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment.
Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's.
Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68.
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In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.
 
Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans.
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