NEWS FLASH!
Not that it is something smacking brand new....but it is something that agents, mortgage brokers and buyers should be informed about.
By knowing this, it can help to save a deal.
I am finding that most REOs are requiring that the buyers that submit offers include a Pre-Approval or Acceptance from a Bank / Lender and that the Mortgage Broker letter of approval is just not sufficient. Now to some this may not be News or EXTRA but it is to some. The old way of just sending a pre-qual letter just may be over. Some REOs are even requesting a "cover letter" to explain briefly the financing. So in other words they want it to be clear that this buyer is serious and that they are qualified to purchase. One of the main reasons I am told for these requirements is because of the MA and PA - Real Estate/Mortgage companies that are having the agent submit offers with just a mortgage letter of approval instead of actually knowing what the buyer is approved for. Which in the end can cause offers to fall out due to lender financing issues. They want avoid unsuccessful offers.
How will you know that the seller require this? Your agent should check the MLS and read the confidential remarks, or check the additional documents on the listing or speak direct with the agent for any requirements for the offer. Along with any disclosures there will probably be Offer Instructions or Offer Preferences and procedures for submitting an offer.
If these instructions are included or if it is covered by the listing agent, it would be beneficial to pay close attention and submit the offer as instructed. I have had REO agents tell me that the seller (Banks or Asset Management Companies) are very particular and detail oriented about offers.
Usually at the bottom of the procedures it will read: This information in this document is being supplied to you as a "courtesy" only and is NOT to be construed as California Law or guidelines that you MUST adhere to for your offer to be submitted to the Lender/Seller of the property. However, if the Lender/Seller requires offers not be submitted to them that fail to meet their criteria, then such offers WILL NOT BE SUBMITTED per the Lender/Seller's request.
Here's a little information on the difference in Pre-Qualified vs Pre-Approval letters or certificates:
Here is a fact: Many or most Realtors will not work with a potential buyer or show them homes unless they are at least pre-qualified for a mortgage. They do not want to waste their own time showing houses that the buyer cannot afford, or going through the whole offer/acceptance process only to find out that the buyer cannot qualify for a loan.
Why? The loan amount usually guides the process. This is something First Time Buyers may not understand that is best to have the mindset of getting qualified first instead of thinking finding a "Home before loan" is the way to go about finding a home. Buyers, most real estate professionals would tell you this reasoning is backwards and they will probably not want to start looking for a home with you until you have taken the proper steps. Read further because it is wise to know why.
Until you are approved for a loan amount, it is impossible to know the appropriate price point for your home purchase. To find out how much home you can afford to buy, meet with a lender to analyze your home loan options. Before making an offer on a home, the best thing you can do is get a written pre-approval from a qualified lender for a home loan. This process involves submitting a complete loan package to the lender for approval. Your offer to the seller is much stronger than those received without such a financing commitment. It makes you a much more attractive buyer, and it helps you know with much more certainty how much home you can afford to buy. Pre-approved loans are preferred over pre-qualifications, as the vetting process for pre-approvals is much more thorough.
WEAK - is the individual that thinks: and should never make an offer: A person that calls you to show them houses and they have no idea of what range of house they are looking for. This is the first red flag that this potential buyer has no potential when it comes to buying a home --- at least not at this time.
Myth: When I find the right house I can then go apply for a home loan. Sure you can... however, it is not the smart way to approach looking for your new home. This process is a myth - finding the home first is actually doing the process backwards and can cause you pretty of pain if you find out you cannot afford that house or when you go to do it right ~ the house is gone!
Some facts about this method:
- Potential buyer is probably not that serious about purchasing a home
- Wasted time and gas
- Individual has his facts mixed up!
MILD: Pre-Qualified letter or certificate - Remember its just an Opinion:If that same buyer goes to an agent and 
have a Pre-Qualified letter or certificate or a quoted loan price range that they will be able qualify for. We agent really like to see the letter or certificate but have been known to take the buyer's word for it if they are smart enough to say a loan officer told them. A Pre-Qualified potential buyer is only an opinion and is probably based on credit, employment, income, debt and asset information that has been provided by the potential buyer. Sometimes a credit report is also pulled but not in all cases.
Some facts about a Pre-Qualified (Opinion):
- Unverified information
- Does not guarantee that the borrower will actually obtain a loan
- If credit report is pulled - the opinion is somewhat stronger but still likely that there is a still a great deal of unverified information.
A Pre-Qualified letter or certificate usually states:
- Maximum loan amount
- Term
- May state type of mortgage loan
- Should include a disclaimerthat goes something like this: This pre-qualification is based upon preliminary unverified information, which although deemed to be reliable, is not guaranteed to be correct. A final loan decision cannot be made until a complete mortgage application and supporting documentation is received and verified. This letter does not guarantee loan approval, nor is it an offer or commitment to make a loan at the above rates and terms. Interest Rates are subject to daily change without notice and may affect the loan amount for which you qualify."
STRONG: Pre-Approval letter or certificate - The key word her is it is approved or verified. Not guarantee of the loan but it is much more likely a Pre-Approved potential buyer will obtain a loan than a Pre-Qualified potential buyer, and way more than an individual who has neither.
Benefits of Pre-Approval:
- Potential buyer will know how much of a home they can afford
- Agents feel more eager to work with someone that is Pre-Approved or at least Pre-Qualified
- Stronger negotiation position
- Sellers take the buyer's intent more seriously
A Pre-Approval letter or certificate usually states:
For FREE MARKET EVALUATION of your home visit http://www.motheranddaughterrealty.com/
Check out my Mother and Daughter Blog for other tips for Sellers and Buyers. I work with my daughter as the Mother and Daughter Real Estate Team and we also focus in Short Sales and the Pre-Foreclosure process. Our consultations are free. Our aggressive marketing plan includes progressive on-listing advertising. If you are thinking of selling or buying a home in Northern California's Central Valley (San Joaquin County - includes Stockton, Manteca, Lathrop) and Stanislaus County- includes Modesto, Riverbank); East Bay (Alameda County - includes Hayward, Fremont, Newark, Union City & Oakland) and surrounding areas. If you would like a FREE Home Seller or Home Buyer Handbook, please call us at Perfect Financial Solutions 866-750-8282 or email at US. Our best connection is our website: http://www.motheranddaughterrealty.com/.
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