You’re Approved: Oh Really?
I have been selling real estate in Chicago for 12 years and I have made and received countless offers. First the buyers writes up an offer and I review the offer and either the offer is perfect or there’s a counteroffer until finally the sales price is agreed upon. But before all these offers and counteroffers take place, the sellers want to know if the buyers can really afford to buy. Do they have their financing in place?
As a seller, you want to make sure the buyers are serious. Serious enough to have already applied for and received a preliminary approval on a home loan. If they haven’t, then it makes sense to wait to until the prospective buyers go get one. After all, if you accept an offer and the buyers hand over some earnest money along with the signed sales contract, your property goes from “for sale” to “pending.”
During this pending status, the buyers will proceed with getting their mortgage lined up. But what if the buyers don’t have their mortgage application already in play? What if you accept an offer only to find out three weeks later they can’t get a home loan after all? It means your property was taken off the market. Yes, you can get backup offers but unless it’s a cash deal, the backup offers also need to have an accompanying loan approval.
When I review a buyer’s letter from a lender, I look to see exactly what the lender reviewed. Did the lender accept a loan application from the buyers and review their credit or did a loan officer simply perform a telephone interview with the buyers without reviewing anything regarding credit, income or money needed for a down payment and closing costs?
If the buyers haven’t provided their lender with any documentation or haven’t applied for a mortgage at all, how serious can the offer really be? As a seller, you need to make sure your offer is a solid one; your buyers should have a letter in their hands from a lender stating they have applied for and are preapproved for a mortgage. All that’s left to do is find a property.
As a buyer, get your finances in order before you go shopping, get your pre-approval. Know how much you can afford and provide your lender with any documentation they request. Your offer will appear stronger with a pre-approval and if you happen to be in a multiple offer situation the offer with the pre-approval will be consider stronger even if the offer is for a lower purchase price. Shopping for a home is so much more fun knowing the financing is already taken care of!