"What do you mean they can't get the loan?" the seller asked. "We've been waiting for 17 days and we are just finding out?"
Even though the buyer had worked all his life except for one year, because of a case of discrimination and a lawsuit, the lender turned down the buyer's loan. Even though it happened two years ago, the underwriter said that this would increase the interest rate on his loan making his monthly payments unaffordable. Everyone was very disappointed.
There are some situations that sellers and agents just can't anticipate. However, in most cases there are several ways the seller's agent can protect the seller from entering into escrow with an unqualified buyer, losing valuable marketing time and making other buyers wonder why has the home sat on the market so long and what is wrong it.
- Motivation. Know the buyer's motivation. One that is relocating for a job, is stronger than a buyer buying a second home. The family out growing their condominium is stronger than the one who is renting and thinks it is a good time to own.
- Proof of Funds. Before an offer is accepted, the buyers should be required to submit a recent bank statement showing that they do indeed have the money for the deposits and closing costs.
- Loan Prequalification or Preapproval? The seller's agent should contact the buyer's loan officer to verify that they have actually reviewed the application, bank records, and paystubs.
- Appraisal Contingency. The buyer's loan also depends on the property appraising at the price offered. If it appraises higher than the accepted offer, there is no problem. However, in this market, appraisers are still appraising conservatively based on comparable sales in the area. On occasion, appraisers may come from out of the area and not know every comparable sale. So it is very important that the agents provide the appraiser with the best solid comparable home sales to support the price.
- Higher Offer Trap. At this time, many sellers are receiving multiple offers. Some buyers will offer above the fair market value in order to get their offer accepted, knowing they will renegotiate the price if the appraisal comes in lower. If the seller does not want to renegotiate the price, they still have to share the appraisal with the next buyer. So make sure that you have strong comparable home sales and the strongest, most motivated buyer with a fair price or money to renegotiate with.
So the moral of the story is look a little further than the price and terms on the purchase agreement. Make sure the buyer can indeed fullfill their offer so no one gets burned.
Virginia Hall
ABR, CRS, CNE, SFR, ePro, GRI
Keller Williams Realty
DRE #01409
760(619)258-8585
