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Financing

Buyer / Seller Information Market Updates

Pre-Approvals and Financing: Quality Matters

June 3, 2013

Author: Ron Gable, Vice President and Manager of Alain Pinel Realtors San Mateo and Half Moon Bay offices.
What a difference a market can make; buying a home today has, in many cases turned into an extremely competitive environment. Many properties are attracting multiple offers and selling for well over the asking price and this is changing how buyers need to think about pre-approvals. That is where a lender has reviewed the buyer’s credit and income/expense history in order to pre-determine their ability and amount of loan obtainable in order to buy. For years, REALTORS® have been advising their clients to obtain a pre-approval for a home loan prior to making an offer – and in this market, it is not so much about whether you have one, but the quality of the one you have.
In the past, there was a question of what to do first: shop for a property or look for financing? Traditionally, many homebuyers used to buy a home backwards. A typical scenario was that a buyer sees a property they want to purchase. They have their REALTOR® formulate an offer. When it is accepted the scramble starts. There would be a frantic rush to find a lender to work with in order to meet the loan contingency removal date. Thankfully for everyone, that process has changed for the better.
In today’s environment nearly 100% of offers come with a pre-approval letter or commitment so the seller can have a comfort level with the buyer’s financing requirements. In other words, the buyer has gotten the financing equation out of the way with the exception of an appraisal.
One thing inexperienced buyers don’t realize is how the quality of the loan pre-approval can affect the favorability of an offer. Which lender, their track record, and their reputation in the community can all affect how an offer is viewed. An out of state buyer who has a long-term relationship with a bank may not be looked at with comfort by a seller who has never heard of the bank and questions their ability to perform. So too with a web-based lender, one that has no physical location and whose communication process may be by email. In a market in which we are seeing many all cash offers, buyers requiring financing need to do everything possible to reassure a seller than their transaction will go smoothly to remain competitive.
When reviewing multiple offers, a key point that seller’s agents advise their clients is to look at who will be providing the financing. Many local lenders will call the seller’s agent prior to the offer being presented in order to introduce themselves and confirm the buyer’s ability to obtain financing. The purpose there is not to sell their buyer per se, but to add an additional level of confidence. Local lenders who are known to agents are often received in a favorable light, and the seller’s agent will have the ability to tell their client that they know of this lender. Often times that agent has done business with that lender and can offer an even stronger level of endorsement for that particular offer.
Today’s market is competitive – buyers are making all kinds of compromises to make themselves more appealing to sellers. Buyers are not only facing bidding wars and multiple offer situations, but in the Bay Area, buyers are up against all-cash offers. For the majority of home buyers who do require financing for their purchase, make sure you have a pre-approval from a reputable lender. To win in this market – the value of making financing as easy and comfortable for all parties cannot be overstated.
This article recently ran in the February 8th, 2013 Palo Alto Daily News publication Premier Homes.


About Author:

Ron Gable is a tenured leader in the real estate industry and serves as Vice President and Manager of Alain Pinel Realtors San Mateo and Half Moon Bay offices. With long-term family roots in real estate, Ron brings a highly qualified level of experience and performance to office management and guidance to sales professionals.