There is nothing worse for a home seller than to enter into an agreement with a prospective buyer, virtually take the home off the market, and then find out somewhere down the road that the buyer isn't qualified.
During the peak of the housing boom, Realtors would advise their clients to investigate home buyer qualifications closely. Realtors would routinely contact the lender personally and gather as much information as possible about the buyer, sometimes even before accepting the offer. At the time, homes were scarce and sellers had all the power. Now roles are reversed and sellers tread a bit lightly for fear of scaring off a buyer.
To make matters even more complicated, new finance rules are making qualifying for a loan tougher, and the changes to lending practices are coming fast, sometimes sweeping away otherwise qualified buyers in the process. As a result, lenders are often taken by surprise when a new loan stipulation disqualifies their client.
It's difficult to distinguish a qualified buyer from a disqualified buyer when there are programs available that require little to no money down. FHA loans for example require only 3.5% down. A buyer can build closing costs into a loan and get a $200,000 home for only $7,000 of up-front contribution. Other government loans, such as VA, may require even less, and in some cases, no money down. You don't have to have a lot of money to buy a house, even in today's market.
Take heart in the fact that Realtors do their best to qualify buyers before they spend resources showing homes. If a Realtor brings a potential buyer to your home, they have likely done what they can to pre-qualify them. But that doesn't mean all will end well.
Here are three things you can do to minimize the chances that you'll begin the transaction and have it fall apart along the way:
1. Get a pre-approval letter. This is slightly more solid than a pre-qualification letter. But beware. Any letter is only as good as the loan officer writing it.
2. Ask if this buyer is approved by the Realtor's preferred lender. Realtors have one or more lenders they use regularly, and they use these "preferred" lenders because they are sure that once the process starts, it will close. Often times buyers come to Realtors with their own lender in tow, and in that situation the Realtor may not know with certainty that the buyer is fully qualified (see #1).
3. Require a loan update letter often in the process, to solidify the buyer's qualification.
Of course, having the right Realtor will help as well. If you have question, TALK to TOP.
Al Stickland
Riley Jackson Real Estate
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