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WHAT SELLERS WANT TO SEE IN YOUR PURCHASE OFFER:

July 24, 2019  /  Budgeting  /  Marti Reeder

Over the past several years, we’ve been experiencing a strong seller’s market here in the Puget Sound, including the geographic market I specialize in (Covington, Kent, Maple Valley, and Renton).

In almost every way, sellers called the shots. They were in a position to do so because of classic supply-and-demand dynamics.

In short, historically low levels of housing inventory left them holding all the cards.

While the market has softened somewhat for sellers, it’s still a seller’s market. And that means buyers still need to write competitive offers.

One of the key elements of most purchase offers is a financing contingency. In other words, the buyer’s offer is contingent upon them getting a mortgage for the home.

As part of the financing contingency, a buyer will typically include documentation from their lender indicating they are qualified to purchase the home. That’s what I want to talk about today.

LENDER APPROVAL LEVELS

There are three levels of lender approvals that are commonly provided as documentation with a buyer’s offer. Not surprisingly, they have three very different meanings to the sellers you are trying to convince to accept your offer. These levels are:

  • Pre-qualification
  • Pre-approval
  • Certified or Underwriting-approved

Let’s look at each of these.

Pre-qualification

  • Buyer has a brief conversation with the loan officer regarding income, assets, and debts
  • Loan officer does not verify any of this information
  • A prequalification letter is automatically generated by a system, but not reviewed by an underwriter
  • Offer strength with this type of letter = low

Pre-approval

  • Buyer has a detailed conversation with the loan officer regarding income, assets, and debts
  • Loan officer pulls and reviews a credit report
  • A pre-approval letter is automatically generated by the system, but not reviewed by an underwriter
  • Offer strength with this type of letter = moderate

Certified or Underwritten

  • Buyer has a detailed conversation with the loan officer regarding income, assets, and debts
  • Loan officer pulls and reviews a credit report
  • A pre-approval letter is automatically generated by the system, and is reviewed by the underwriter
  • All information is verified
  • The loan file is approved and fully underwritten, and requires only an appraisal to be completely approved
  • Offer strength with this type of letter = extremely strong

As a seller, you want a buyer who is certified or underwritten rather than preapproved (and virtually no seller should be comfortable accepting a financing contingency from a buyer who has only been prequalified).

And as a buyer, you are best served by having underwriting approval before you begin the home search process. Doing so eliminates surprises, allows you to close quickly if needed, and offers you the best possible position from which to negotiate.

We work with some of the best lenders in the business. If you’re a buyer ready to purchase a home and need a recommendation, let us know. We’d be happy to make a connection!

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