Goodspeed: What to share with your agent
QUESTION:How much information about my finances should I share with my real estate agent? I am looking for a home and have been pre-approved by my lender. Should I share this pre-approval letter with my agent? I’m afraid my agent might give away my pre-approval amount to the seller who would then know how much I can negotiate for the home. How should I handle this situation?
ANSWER: Your real estate agent needs to have some idea of what you can afford so the agent can show you homes in your price range. There is no sense keeping your agent in the dark about how much you can afford to spend on a home. It will just waste your time and the agent’s.
But your agent does not need to know the details of your finances.
You should let the agent know you have been pre-approved for a loan, although you do not have to show him/her your pre-approval letter. (By the way, being pre-approved is different from being pre-qualified although many buyers confuse the two. Being pre-qualified simply means you have given the lender some general information about your income, savings and debt. Based on this information, the lender will ballpark an amount you can afford to borrow. Being pre-approved means the lender has actually verified your income and employment, pulled a credit report and approves a loan amount as long as the home appraises out to value. As a buyer, you want to make sure you get pre-approved.)
Back to your agent: The agent does not need to know how much you have been pre-approved to borrow, only that you have been pre-approved and what price range you are looking in. It’s up to you and your lender to take your pre-approval amount, add in your down payment and come up with your price range – for example, under $400,000.
Knowing that, your agent can then tell the listing agent that you have been pre-approved for a home in that price range without giving away the details. It does not mean you will pay a specific amount.
Even if the seller knows you are looking for homes up to $400,000, it does not mean you have to pay $400,000. You still pay what you want to pay and the seller will still try to get as much for the home as possible.
Linda Goodspeed is a longtime real estate writer and author of “In and out of Darkness.” Email her at: email@example.com.