The Disclosure Dance

The days of dropping by a Sunday open house on a whim may be numbered. Sellers, frustrated by lowball offers and by buyers who are "just looking," want to make sure they're dealing with serious apartment-hunters. As a result, more and more potential buyers are being asked to provide detailed financial information — from their employer and salary to their debt ratio and savings — before they're even allowed a peep at an apartment for sale.

 

"The listing brokers are scrutinizing the potential buyer before they even get to the building," said Michael Signet, executive director of sales at Bond New York. "It's a preventative measure [to keep sellers] from wasting their time with people who are just shopping around."

Other buyers might be serious but may not realize the apartment in question is too expensive, brokers said, thanks to the difficulties of getting a mortgage now.

However, the demand for earlier and tighter pre-qualification leaves buyers' brokers walking a tightrope between gaining their clients' trust and extracting the sensitive personal information sellers require.

"It's a difficult thing to ask for bank statements when you first meet someone," said Jorden Tepper, an executive vice president at Century 21 NY Metro. "But it's a necessary thing to explain."

Edith Nanazia, a sales agent at Bond New York, has recently encountered several different sellers who have asked her to fax or e-mail them her client's financial information — including income and net worth — before showing their apartments.

One client was barred from viewing an apartment until he gave the sellers not only his financial information, but the date he'd be prepared to close.

"They want to make sure they are not wasting their time by showing the apartments to anybody who is not qualified," Nanazia said. "Having a pre-approval for a mortgage doesn't mean much."

Nanazia said she first received these requests several months ago, but they are now so frequent that she asks her buyers to fill out the Real Estate Board of New York's financial disclosure form — a signed document that states a buyer's income, assets and liabilities — and keeps it on hand in case sellers request it.

"It's becoming the norm," she said.

Sellers' heightened scrutiny reflects a growing wariness of buyers who are waiting for prices to fall further before buying, or merely looking for rock-bottom deals. Moreover, sellers may not trust other brokers to do a good job vetting their clients.

"It might be a product of sellers being annoyed at lowball offers," said Tom Postilio, a managing director at residential real estate brokerage Core. "It's a total waste of time to work with someone who can't afford what you're selling."

Sellers are also realizing that mortgages are much more elusive these days, and that many prospective buyers likely won't qualify.

"Two to three months ago, it was 'Don't worry, we'll make it work, just bring your buyer,'" Signet said. "Now, it's 'Let me check them out.'"

Sometimes, the buyers themselves have a distorted view of how much they can afford in light of today's difficult financing situation, said Postilio, who recently convinced a client to lower his maximum price range from $2 million to $1.5 million after taking a closer look at the buyer's finances.

As a result of all these factors, requests for detailed financial information are now popping up throughout the home-buying process.

Making an offer on an apartment, for example, used to mean a quick phone call to the listing agent. Now, it's a laborious process, even for apartments at the low end of the price spectrum, said Jeffrey Tanenbaum, a senior vice president at Barak Realty.

Tanenbaum recently made a $390,000 offer on a co-op on behalf of a buyer, and the listing agent asked for the buyer's full financial information for the co-op board president to review before the seller would accept the offer.

"This other agent has put me through the wringer getting financial statements," said Tanenbaum. "I have never had a situation where I had to procure financials to this degree in advance of a signed contract."

Nanazia said one client was asked to provide not only financial information and a pre-approval letter along with her offer, but copies of her tax returns from both 2007 and 2008 and her mortgage brokers' phone number. Nanazia refused, feeling that the request crossed the line.

"I think it was a little too much to ask for the offer, without it being accepted," she said.

Co-op buyers aren't the only ones having to provide more financial information. Part of the allure of buying a condo, historically, has been skipping the rigorous co-op board review process. But now that developers and sellers are putting mortgage contingencies in sales contracts, they are asking for more information, wanting to ensure that the buyer is likely to get financing, said Gary Kahn, a senior vice president and associate broker at Core.

"When condos are giving finance contingencies, they want information before they'll go to contract," he said. "What's their job, how much do they make, how likely are they to be able to get the loan."

Buyers, not surprisingly, don't appreciate what they perceive to be an invasion of privacy.

Nanazia recently fielded a concerned phone call from the parents of a client who was required to provide written financial information before touring a one-bedroom co-op on the Upper West Side.

"They don't understand why they have to give so much financial information, even before they've seen the property," Nanazia said. "I have to really tell my clients in advance what to expect — this is the way things are working right now."

In the era of identity theft, people are especially reluctant to provide sensitive personal information, Tanenbaum said.

"The buyers are saying, 'What is this? It's ridiculous, I don't want to have to show this,'" he said. That gives buyers' brokers the awkward job of asking for financial information from buyers shortly after meeting them.

"If you tell them, 'Bring a pay stub the first time,' they'll be gone," said Tanenbaum. "If you get invasive too soon, you're going to ruin the deal."

Tepper suggests easing the blow by telling buyers right away that they may have to provide detailed financial information later in the process. That way, it doesn't come as a surprise.

"You want to prepare them for that so they don't get put off later in the game," said Tepper, who asks buyers to fill out REBNY's financial disclosure form "as early on in the process as proper etiquette and communication will allow."

Tanenbaum often hands out a "buyers' guide" he created to let clients know what to expect. To help build a rapport, he asks to meet them in person at a Starbucks before showing them apartments. "Trust has to be cultivated," he said.

That's where the skill comes in.

"A lot of it is up to the salesperson to do it in a way that's informative rather than intrusive," Tepper said.