What’s Best…..a Mortgage Pre-approval, a Pre-Qualification or Cash?

“There is nothing more important in the sale of a home than the buyer’s financial ability to purchase.”  I say this over and over again when I train new agents or upon reviewing offers with a seller.   If the Buyer’s financing is not verifiable, there is NO reason for a seller to take their home off the market and lose selling time to a well-qualified buyer.

How do you know if a buyer’s financing or cash offer is good?   Well, here is another phrase I use often, it all depends.

Let’s discuss a Cash Buyer.  While it may seem obvious that you need to confirm the Buyer has the cash funds, I’m under contact right now for a home my Buyers are purchasing and the Listing Agent never asked for ‘Proof of Funds’ …hard to believe.  Now I know my clients are qualified, but the Listing Agent and his Sellers do not.  Why they proceeded without verification is beyond me.  I once asked for a Title Company to hold the full Cash purchase price when the Buyer was a foreign citizen as there was no way for me to verify the Buyers had the cash necessary.  

If a Buyer is financing the home with a Mortgage, there are several things you need to verify.  If the letter you’re provided with is a Pre-Qualification, it generally means the lender has not done anything yet to verify income, assets and credit.  Always ask for a Pre-Approval and then verify it’s good by getting the lender on the phone in a timely manner (do they answer the phone and call you back or do you always get a voice mail)

Determine if the Lender and the Lender Representative credible by researching the company.  (anyone can draft a Lender letter that looks good).  Next, these three steps are critical:

1.       Verify the Lender confirmed the Buyer has the assets necessary to complete the sale (the difference of the mortgage and purchase price, taxes , insurance and HOA)

2.       Verify the Lender checked the Buyer’s credit score from all three Credit Organizations.

3.       Verify the Lender confirmed the Buyer has the income to support the Mortgage.

If all three of these were not done, it’s not worth considering the offer.  You don’t want to find out weeks into the sale, that the Buyers cannot afford the home.

With that all said; a Seller wants to only consider an offer with a well-qualified and verified Buyer.  “There is nothing more important in the sale of a home than the Buyer’s financial ability to purchase.”