Are your clients reluctant to get pre-approved? Here are some tips 

When Derek Nereu meets prospective homebuyers these days, he often finds himself urging them to get their pre-approval mortgage work done before showing any houses.

Nereu, a North Carolina agent with the Tritori Realty Group, said despite affordability being a barrier for many buyers, lately his clients have wanted to start looking before they know what they can afford.

He suspects that a year ago buyers were more likely to be pre-approved for a mortgage and knew what they could afford because the market was hot and they needed to act quickly, typically competing against multiple offers. 

"The current buyer thinks they have more time, but that's not always the case," said Nereu, adding that in this market a well-priced home can still sell quickly.

Nereu isn't alone when it comes to agents needing to prod potential buyers into getting pre-approved for a mortgage — or at least researching what they can afford. A recent Zillow survey found that just 13% of prospective buyers spend at least a month researching mortgage lenders before applying, which is about the same percentage of people who spend a month researching a new TV purchase. In contrast, 28% of people surveyed spent a month or more researching vehicles prior to buying a new car. 

Several factors are in play when it comes to buyers dragging their feet on the financial part of the homebuying process and seeming reluctant to shop around for the best loan.

The most common reason for not shopping around for the best loan rate is the mistaken belief that it will hurt the buyers' credit score, according to the survey. While the initial mortgage pre-approval check can impact a credit score, buyers can usually submit multiple applications within 45 days with only one hit to their credit score. 

There's also that sense of dread that comes with submitting financial documents to figure out what they can afford.

"I think there is more of a fear that the credit might be bad and they don't want to know," Nereu said. "But if the finances are in order, the rest of it usually comes together quickly."

Nereu said some agents won't show homes to prospective buyers unless they are already pre-approved, but his strategy is to try and work with them so they can learn what their price range is beforehand.

One tactic that often works for him is telling stories of previous experiences about other buyers who fall in love with a home that is not in their price range. A good home can be found in every price range, he said, so it's better to have that search narrowed beforehand.

He also lets clients know that having a good idea of what they can afford is very helpful in the current market. Sellers are more willing to come down on a price for buyers who are pre-approved compared to those who are only pre-qualified. Pre-approved buyers will still need to contend with all-cash offers, but the overall competition for homes has eased as the market has cooled. 

During the holiday season, pre-approval is even more important for agents and their clients who are hoping to buy. With so many people, including loan officers, taking time off, having pre-approval documents in hand can make the process smoother and increase buyers' chances of success.

It's also generally the time of year when some of the best deals can be had, according to research from ATTOM, which found that October, November and December are usually the best months for buyers to close a deal.

"Seasonality has always had an impact on home prices, which tend to weaken in the fall and winter months when there's less buying activity," said Rick Sharga, executive vice president of market intelligence at ATTOM. "Savvy homebuyers can take advantage of those lower prices and less competition."

One strategy for agents hoping to get their buyers into a new home this season is to point out that the pre-approval process has some flexibility, and loan officers often try to make the numbers work. Buyers who are less intimidated by the process may be convinced to start shopping around for loans before actually looking at homes.

"Taking time to understand their credit report, repair any issues and consult with a qualified mortgage professional can make a significant difference in a home shopper's experience," said Libby Cooper, vice president of Zillow Home Loans. "Buyers often don't understand that a loan officer can be a partner in the home-buying process. They help discuss options and find the right fit for a customer's personal financial situation."