Buyer Mistake: Not Being Pre Approved
J Philip Faranda April 30, 2012
I have wagged my finger at both buyers and sellers on the current real estate market, and today it is once again the buyers' turn. While we are indeed far from an overall recovery, all real estate is local and in Westchester we are in a busy spring sales cycle. In more than a few locales, there are multiple offers on some select, well -priced properties. In those cases, I am witnessing a unique way for buyers to fall on their spear: not providing a mortgage approval letter.
No matter how many times we preach to buyers of the imprtance of being pre approved, there are still those who insist they'll get one only after they find a house, and there are still to many enabling agents who are willing to show them properties. It is living dangerously of course, because if you don't know of a mistake on your credit, identity theft or an old debt, you could be in for weeks or months of work you don't know about until it is too late.
In the sellers' case, no home owner is going to tie their home under contract with a buyer until that buyer has been rigorously checked out. To not do so would incur the risk of missing out on all those May and June buyers and face going back on the market later in the summer. That is costly, and can easily be avoided in most cases by simply calling a loan officer to verify the buyer's ability to perform.
In a best case scenario, a well qualified buyer without a pre approval letter can miss a weekend and be outbid by someone with their act together. In those cases, they lose the house. Even if they are comfortably bankable, the house is gone, because they didn't prove so soon enough and someone else did.
I am seeing two cases where the buyers are out in the cold in the past week. There are competing offers, the other offer has similar price and terms, and guess what? A good solid letter from a lending institution with a loan officer's signature and direct number for any questions come from their competition. Contrast that with a wink and a promise, and the seller's decision is easy.
Spring comes but once a year. We are seeing a tenuous balance between the old buyer's market of the past few years and what we hope is the seed of a recovery, but at the very least a busy cycle of the season. Given the amount of money changing hands in a home sale and purchase, it seems simple enough to spend 10 minutes on the phone with a loan officer to make sure you aren't wasting your time. Caution is still the operative word on both sides, and it behooves buyers to make sure their house is in order before they find a house they love.