One of the biggest mistakes I see property owners make when selling their homes is not getting pre qualified before they put the real estate sign in the front yard. I think it makes sense that a buyer should get pre qualified before starting a home search, but what about you as a home seller? In many ways it is more important that you get pre qualified first before you start looking for a buyer for your home.
You could end up selling your property and then find out that you have a big problem. Finding out that you cannot buy in the price range that you thought you could, might ruin your day. During my real estate agent career I actually had this same exact thing happen to a client of mine. They had accepted a sales contract and found out later that they did not have the income and credit scores to qualify for the home that they were hoping to buy. So having their dreams get squashed was one thing, but on top of this they had a bigger problem. The buyer did not want to let them out of the contract.
Contractually my seller was obligated to the buyer to sell them their home. The possibility existed that they could face legal issues for non performance or failure to transfer title. The buyer who was buying their home wanted it and made it very clear that they were going to bring legal action against them. The other issue would be that real estate commissions would also be due because a ready willing and able buyer was secured. The buyer had fulfilled all of their contingencies and was ready to close. The buyer’s agent made it clear that they had done their job and they expected payment either way. Ultimately my sellers chose to continue with the transaction to avoid any legal entanglement. The final result was that my clients ended up buying a less expensive home than what they thought they could. Unfortunately, my client’s failure to plan cost them big time.
Since I have been in the mortgage business as a loan officer I see people go out and enter into real estate purchase contracts without getting pre qualified. To me this is just a potential disaster waiting to happen. For one thing, I do not understand why a real estate agent would take someone out with being qualified to purchase a home in a particular price range. Second, I cannot imagine why a seller or a listing agent would even consider an offer without an approval letter, yet it happens all the time. Third, why anyone would put money down on a home without knowing what they can buy is beyond my comprehension. Sometimes it is very difficult to get the deposit money back once it is put down.
When you get pre qualified you have the confidence to go out in the market and confidently look at real estate. You will also be able to attract the better agents to work with. Experienced real estate agents will demand that you have a pre qualification in place before they even let you in their car. The bonus of having an approval letter is that agents will work harder for you and you will see a higher caliber of homes on the market. The other benefit to getting pre qualified is that it says to the seller that you have cash. To a seller the biggest issue in accepting a contract is the buyer’s ability to pay for the property by either paying cash or by obtaining financing. Being pre qualified eliminates a lot of this concern.
When selling your home it is just as important to have your finances in order as it is for the person buying your home. Do not get caught without a viable plan.
Dave Mason has been in the Real Estate, Consumer Finance and Mortgage industry for nearly 18 years. He has a degree in Finance from the University of Arizona. Dave Mason is currently employed as a mortgage broker in the state of Arizona.
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