What Sellers Need To Know About Mortgages.
Home sellers who receive an abundance of offers might be tempted to grab the highest price and call it a deal. But that might not be the smartest way to choose the best offer of the bunch.
A better approach is to consider a variety of factors, including the buyer’s ability to pay cash or obtain a home loan, according to Kris Berg, co-owner and broker at San Diego Castles Realty, a real estate brokerage company in San Diego.
“One of the first things we address is how strong the buyers are financially and how confident we feel that they’re able to close,” she says.
An all-cash offer always merits consideration because a failure to obtain financing is “the most prominent reason” why transactions fail to close, Berg says. In some cases, the buyer is unable to qualify for a mortgage. In others, the appraiser’s opinion of the property’s value falls short of the purchase price, causing the lender to quash the financing due to a so-called low appraisal. With a cash offer, no lender is involved, so both risks are eliminated.
The answer is where pre-qualification letters, or “prequals,” come into the analysis. Prequals are written by lenders to inform sellers that would-be buyers are qualified to obtain financing. But Carpenter says not all prequals are equal, so sellers — or their agents — need to do some legwork to assess which prequals are credible.
“My advice to a seller would be to take a look at the qualifications of the individual who wrote that letter,” Carpenter suggests.
While loan officers shouldn’t disclose the buyer’s personal information to the seller’s agent, that agent can call the loan officer and engage in a conversation about the buyer’s strengths, Carpenter adds. One question might be whether the buyer could be characterized as “qualified,” “well-qualified” or “barely qualified.”
Steven Ornellas, a real estate broker at Steven Anthony Realty in Fremont, Calif., suggests that the seeds of this investigation can be planted even before the offers are received. The seller’s agent can insist on a thorough pre approval and an understanding of the buyer’s true financial capability.
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