Across the Picket Fence - Can the Buyer Afford It?Return to article list
Across the Picket Fence
Topics: Pricing | Contracts | Disclosure | Offers | Financing | Buyers | Agents | Buyer Issues
Pre-qualification/Pre-approval...Can the buyer afford it?
Seller: How do I go about pre-qualifying buyers? I don't want to take my house off the market for someone who won't be able to afford it.
Simply request that the buyer provide you with a letter of pre-qualification fron a lending institution within a certain number of days (five business days is customary) verifying they should qualify for the mortgage amount required. This request should be stated in the Purchase & Sales contract (it is standard in many contracts). If the buyer fails to produce the letter, the contract is cancelled.
What is the difference between "pre-qualified" and "pre-approved"?
"Pre-qualified" means that the lender has checked the prospective borrower's income, assets, and debt ratio figures supplied by the borrower, and has determined that the borrower will qualify for the mortgage provided all the information is accurate and the credit report is acceptable.
"Pre-approved" means that the lender has already verified the information supplied, the borrower's credit report is acceptable, and the loan has been approved. Typically a pre-approved buyer is able to close as soon as the appraisal and title search are completed.
Seller: How do people deal with multiple offers? We have three parties interested, and all seem equally qualified. I've told them we have to wait to negotiate tomorrow when my husband is back in town, but I have no idea what to do then!
That's a nice problem to have! The fairest thing to do is let all buyers know that you have two other parties interested so that they have an opportunity to present their best offer. You might want to do a "sealed bid" arrangement where you give them a deadline to make their offer, and there is no further negotiation. This will avoid your being caught in the middle of a bidding war.