FS360 Podcast - Episode 47

Mulcahy & Co Loans and Finance Director Warren Freeman says pre-approvals for home loans could help potential buyers be taken “more seriously” when they look to purchase property.

Joining Gavin Nash and David Villarosa from Villarosa Real Estate on the FS360 podcast, Freeman outlined the positives to starting a pre-approval process through a bank or lending institution.

“The benefit of the pre-approval, David’s going to take those buyers more seriously than someone who hasn’t even commenced ascertaining their borrowing capacity,” he said. “In the buyer’s best interest, they need to be pre-assessed or pre-approved. “Before they fall in love with the property, they need to know are they looking in the right price range, can they afford the repayments, are they credit worthy. “It’ll strengthen their negotiations.”

Villarosa said pre-approval helps to give him, as an agent, a “degree of confidence”.

“We certainly do vet people … and we do it as respectfully as we can, but ultimately we’re trying to risk assess, if they are wanting to make an offer on the property, whether that’s going to go through,” he said.

“Some people haven’t thought about it, they’re just like ‘well I’ve got a $900,000 house, I’ve got equity’, but they don’t have a job or they’re on (maternity) leave.

“If they’ve got it, great, but if they haven’t got it and I can get them in front of Warren Freeman from Mulcahy & Co Geelong Loans & Finance, then I can get that degree of confidence.” During the next step of the process, making an offer, Freeman highlighted the importance of making that offer subject to finance in order to have the property valued.

This is an important step as a buyer’s borrowing capacity is only one piece of the puzzle, the other being a bank’s suitability to the property. “We had one client … they were initially knocked back by their bank (for their property) in Marshall because it was too close to the train line,” Freeman said.

“One of the first loans I ever wrote, a young couple wanted to buy a property and there was a petrol tank buried in the backyard. “Doesn’t happen often, but if the valuation falls down (and) it’s an unconditional contract, the consequences are immense.”

Freeman and Villarosa touched on the dangers that come with unconditional offers, however added that too many conditions, such as subject to sale on your current property, could affect the strength of an offer for a new property.

“Clearly the least number of conditions in their offer, the stronger their offer,” Freeman said.

“My role will be to help the clients make their strongest offer possible, which would hopefully be one condition; subject to finance.”

Villarosa added that a building inspection is an important box to tick too.

“That quite often is how people miss out, if they need to be subject to x, y or z and the other guy’s not, well you’re just not going to win,” he said. “Doing a building inspection is a really good idea, whether it’s two-years-old or 20-years-old, you want to know what you’re buying.”

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