Below are some important terms to focus on when reviewing a purchase contract for your home. The terms offered may sway your decision on which offer to choose.
What are the offer loan types? Conventional loans usually require a higher credit score, but how much money a buyer is putting down can also make a big impression for a seller. If a buyer is putting, say, 0-3% down, one might fear the buyer’s liquidity is tight, especially in a multiple offer situation. If a borrower is putting 10-20+% down, most sellers consider that as a strong buyer who likely has the capital to see this through to closing. FHA loans are generally more lax with their debt to credit ratios, and VA loans can be incredible for a borrower, but we have seen the appraisals can sometimes be more conservative if the buyer plans to use 100% financing. If a seller is not in a multiple offer situation, buyers are more likely to get a property no matter how much they are planning on putting down, or the loan type. There can be favoritism in multiple offers for cash buyers or those putting more money down, especially if the property is on the higher end of comparable properties, and/or bid well over list price.
How much due diligence and earnest money are being offered? Sellers feel more comfortable when a buyer has more “skin in the game”. A buyer putting minimal money down tends to make sellers feel they are either not as serious as another might be, or that they have an underlying fear that they will not go to closing. The more “risk tolerant” a buyer is, the better received it is by a seller, although the buyer should be comfortable, as well as their REALTOR, with how much is being offered to the seller.
Is there a contingency to close on another home? Does the buyer need to sell a home in order to qualify, and if he/she does, is it listed or currently under contract? Most sellers are leery of accepting an offer prior to a buyer’s home being under contract and if there are multiple offers, most sellers tend to choose a buyer without any contingencies over one with them, unless there is something more appealing for them, such as desirable closing date or sizable due diligence/earnest money offered.
Have the buyers physically seen the home in person, or are they out-of-state buyers? If a buyer is out of state, a seller might want to make sure that the buyer has physically seen the property. Although many homes are purchased at distance, there is always a fear that a buyer may not like a property in person. This is a good question to ask if the listing agent did not see a scheduled showing with the offering agent, or if sellers/listing agent know that the buyer(s) lives out of state.
Is their prequalification letter from a local lender? There are many great online-only lenders which operate throughout the country and even have well known “names”, but the comfort of a listing agent (and most sellers) is knowing that the lender being used is local and reputable. Many local lenders will take those extra steps for their buyers, especially in multiple offer scenarios and call the listing agent to let them know their confidence in the buyers and their ability to close the transaction smoothly.
Are the buyers prequalified or preapproved? A preapproved buyer is generally more appealing for a seller because it means that the lender has seen the buyer’s financials, and the file has been through underwriting and cleared with “conditions”, or cleared pending a contract. A prequalified buyer means that credit has been pulled and a lender “knows” what he/she has been told. What a buyer is told is important because lending documents/requirements can vary, depending on the loan type, and that can sometimes cause underwriting complications if the buyer has not been made fully aware of what to expect.
Team Anderson Realty is located in the Historic Village District in Downtown Holly Springs, NC, and we would be happy to go over any questions you may have, either in person or on the phone. Please visit: www.TeamAndersonRealty.com or call: 919-610-5126.