Yes, My Buyer Has the Money to Buy . . . Does Your Seller Have the Money to Sell?

Real Estate Agent with Tradd Residential

It has happened here a lot! Not all second or third mortgages or other liens for that matter are always easily available for a buyers agent to find. 

Original content by Trent Cluley

Yes, My Buyer Has the Money to Buy . . . Does Your Seller Have the Money to Sell? Get the facts on the seller's ability to sell, before putting the home on the market!

I believe it is pretty standard real estate practice in most areas to have a pre-qualification / pre-approval letter (or proof of funds), to submit to the seller along with the buyer's offer.  It reassures the seller and provides the buyer a stronger bargaining position.

In fact, experienced agents generally like to have a copy of this letter from the buyer's lender, before they even begin showing homes to the buyer. Kinda makes sense really.  Why waste everyone's time looking at, or making offers on, homes the buyer can't afford? That's nothing but a one-way ride down Heartbreak Alley for all concerned.

The seller's ability to sell on the other hand has always been assumed.  There is no request for a "lender clearance letter" from the seller, verifying that the seller can afford to sell, prior to an offer being submitted by a buyer. Of course, this is because part of a listing agent's responsibility should include getting payoff information and preparing a net sheet or estimate of proceeds for the seller when listing a property. So it makes sense that any offer accepted by the seller should ensure that the loan payoff and other closing expenses are covered, or the seller has sufficient cash on hand to close.

Because, yeah, it sucks pretty bad -- as recently happened to me -- to have to explain to your buyer just days before closing that well, see, the seller actually can't afford to sell at the agreed upon price. He in fact owes tens of thousands of dollars more than the agreed upon price. It's particularly bad to have to explain this to buyers who expressly said they weren't interested in looking at / offering on short sale properties, due to the hassles and delays involved. Uh, awkward . . .

It's one thing to embark on the short sale saga when forewarned and armed for battle, it's another to be blindsided by it.

Obviously in this business there are always unexpected turns and unforeseen scenarios that are hard to predict (the above case being one such extremely unusual transaction), but clearly this is not an isolated instance and I am not the only one to have had this experience.

I recently closed a transaction on a listing of mine here in Pickens County GA, where the young, first-time home buyer, was at closing for a second time within a couple of months. His prior transaction had fallen apart at the closing table, when it was "discovered" that the seller was selling short, without lender approval, and therefore couldn't close. (How it got that far without being flagged by someone sooner is beyond me.)

I now get calls from other agents who want to show my listings, but who preface the conversation with something like, "Can the seller close at this price? Is there a possibility it will be a short sale? Just thought I'd check before wasting my buyer's time . . ." Sounds like they too have been burned by the "undisclosed", "unknown" short sale.

I think we all get the fact that short sales are on the rise. They are part of our environment and will be for some time. But, just as we pre-qualify buyers, we need to pre-qualify sellers and disclose up front whether or not it is a short sale, or has the potential to be a short sale. It is also important to double-check the numbers before the seller accepts any offer, particularly if the offer is substantially lower than list price, or the home has been on the market for a while, not just as an essential part of our duty to our clients, but as a courtesy to other agents and the public as well.

Seems like common sense, but . . .

Trent D Cluley
Keller Willliams Realty - Select Partners


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