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Yes but we see all kinds of posts on here (and I hear stories about it in real life as well) about people freaking out and looking for help because they're days or hours away from closing and something they had no clue about or that they were told would not be an issue is keeping them from securing financing. They all seem to mention about how they got pre-approved and/or pre-qualified before making the offer and had no clue there would be any issues. Or there was an issue they knew about but their banker/broker has been assuring them for months that whatever the item is would be "no problem" until at the last minute it became a problem.
I blame the financing people. My sister bought a house and was going to rent hers out after they moved. All the financing was arranged, documents sent, information about renting their house, etc. Then just 2 1/2 weeks before they were to close finance company said "no, renting that will not work" so my sister dumped her house for sale on the market and (miraculously) got an all-cash offer that closed on time. All during the process the finance people kept reassuring them everything was in order, all the proper documents were lined up until the last minute change. I believe this misinformation is more prevalent and leads to a lot of contracts that fall through.
If they have a decent agent they should have a clue. I always got my buyers at least pre-qualified. Just to prevent my time being wasted if nothing else.
As a prospective seller, I wouldn't consider buyers who are merely pre-qualified to be serious buyers ready to part with cash.
Buyers need to be pre-approved for a 20%minimum down payment conventional loan on a home priced higher than my list price, and I do expect overbids.
Obviously, the more skin in the game they have in their offer, the more likely I would be to consider their offer seriously,
Last edited by SFBayBoomer; 08-03-2016 at 04:31 PM..
As a prospective seller, I wouldn't consider buyers who are merely pre-qualified to be serious buyers ready to part with cash.
Buyers need to be pre-approved for a 20%minimum down payment conventional loan on a home priced higher than my list price, and I do expect overbids.
Obviously, the more skin in the game they have in their offer, the more likely I would be to consider their offer seriously,
You are in a sellers market. You can do that. It takes longer to get pre-approved than pre-qualified. Typically I would be showing clients homes after pre-qualification but while they were working on pre-approval.
You are in a sellers market. You can do that. It takes longer to get pre-approved than pre-qualified. Typically I would be showing clients homes after pre-qualification but while they were working on pre-approval.
From my experience, it did not take any longer to get fully approved from one of my financial institutions than it would have been to be simply pre-qualified, likely because my data was readily available to them in their system. That was five plus years ago (and I did not find a home I wanted to buy), so it is possible that it is more difficult now.
From my experience, it did not take any longer to get fully approved from one of my financial institutions than it would have been to be simply pre-qualified, likely because my data was readily available to them in their system. That was five plus years ago (and I did not find a home I wanted to buy), so it is possible that it is more difficult now.
Many lenders do not write preapprovals, but only prequals.
I don't see a functional difference.
I just want to see that credit is pulled, income verified, etc.
I have a backup offer that is now being considered, and I have my fingers crossed. I'm just a little miffed that a solid buyer like myself was moved into 2nd position because the other buyer is playing these "games."
Is this some kind of sleazy tactic a buyer will use just to get their offer accepted first??
How is it a "game" to take the most money you can get for your house?
Or offer a higher bid when it's a seller's market?
From my experience, it did not take any longer to get fully approved from one of my financial institutions than it would have been to be simply pre-qualified, likely because my data was readily available to them in their system. That was five plus years ago (and I did not find a home I wanted to buy), so it is possible that it is more difficult now.
You are correct if you have everything ready. Most people do not.
Is this some kind of sleazy tactic a buyer will use just to get their offer accepted first??
Why do you call it "sleazy"? The other buyer wanted the house badly enough to offer additional money. Were they SMART to do that? Eh. Maybe so. Maybe no. I suspect they were hoping that if there were any problems with the appraisal, the owner would negotiate down (knowing that he'd have the same problem with appraisals no matter who bought it.)
It's a negotiation tactic. You got out-negotiated. In this state, the financing contingency has an appraisal contingency built into it that specifically states a number of days where the buyer and seller can renegotiate the purchase price if the house doesn't appraise. Most sellers either meet the appraised value or the buyer and seller come to some sort of compromise (i.e, if the difference is $5,000, each puts up $2,500, etc.) Might be hard for these buyers to do, though, if they are tight on money.
FYI, we are seeing more and more low appraisals, because the comps haven't really caught up to the demand, yet. It's hard to convince an appraiser that a house is worth $10,000 more than the house next door just because you had four offers that were a minimum of $10,000 over the asking price, but the comp next door sold 6 months ago -- the market may have been quite different, then.
Best contract: All cash. No appraisal contingency. No due diligence period. Anything else is a crapshoot as buyer and agent try to weigh the pros and cons.
I find it odd that someone would accept any offer without pre-approval for a loan, if there was another offer to consider. It could mean that the sellers aren't in a hurry to sell and have time to put it back on the market, if the sale doesn't go through.
Why is it odd? A cash offer does not require a pre-approval from anyone. All you have to do is show that you have the funds available.
Having a pre-approval is only one side of the coin. They can have the best credit in the world, but if the house doesn't appraise, no lender is going to provide a mortgage for more than the house is worth.
We offered 10K over asking price on our house. When we first saw it online, it was already in escrow and we were completely bummed because it looked to be THE one - no question - we could tell just from interior pictures and drivebys and satellite images/surroundings.
It fell out of escrow a few days after (what are the chances) and we were able to set up a showing for the very next day (we would have gone to see it the same day if the owner had been free) and made the offer the same night.
This was on Tuesday. This was absolutely the house we wanted. The sellers had scheduled an open house for the upcoming weekend. We knew we had to make a solid offer the same day, that we couldn't take the chance on the open house happening - there would have been more / competing offers and probably a bidding war which we were not prepared to enter. It was our idea to offer 10K more than asking with a 24 hour timeline - our agent did not push us into it in the least but agreed it would give us the best shot.
It could have gone either way, but the sellers accepted our offer not even 24 hours later. We were preapproved and had a letter from our lender. We think they were wigged, and understandably so, because the previous buyers were decently far along into the process and then backed out. They were moving across the country and had a timeline as well so that helped us for sure.
Everything went smoothly with the inspection and escrow process. We were renting before so we had no contingency of another house having to sell first. The house appraised for 14K MORE than our offer but if it hadn't appraised, we were prepared with the funds to make up the difference. 10K over a 30 year mortgage is less than $28 per month and the extra cost was worth it to us to lock it down.
If we had only offered asking price or even 5K or 7K over, we are certain that the sellers would have held out to see what happened during/as a result of the open house - and then there's no question we would've lost it to a cash buyer or a higher offer.
This is in California.
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