What You Need to Make an Offer[/caption] Back in 2009 when I bought my first house, all I did was sign the offer, and we faxed it over to the seller. Once they accepted, I went out and applied for a loan. Not today…
There is a whole list of things that you send with your offer:
Proof of Funds
Sometimes even a Cover Page like with a job resume
If you are getting a loan to buy a home, the seller wants to know that you can actually get a loan. This is good news, and it benefits everyone involved:
The Seller – They know you’re good for it and if there are multiple offers, they can choose confidently.
The Agents – How many times has an agent spent weekend after weekend driving a buyer around, make an offer, open escrow, and have the loan fall through? Save your agent’s time.
And You! The Buyer – At the end of the day, the Seller will get a check from Escrow regardless whether the Buyer pays with cash or a loan. So, if your loan is “as good as gold”, you can compete with cash buyers on a level playing field. Back in the day, cash buyers could offer less than someone getting a loan and win the deal. And that used to make sense—not anymore.
Fun fact, I have had all-cash buyers lose out to buyers getting loans just in the last couple months. A strong pre-approval means everything.
In addition to getting approved with your own lender, some sellers will have you get approved with theirs too. Why? Because they trust their lender, and they don’t know yours from a hole in the ground. This also makes sense. And, this is good news for two reasons:
Like I always say, “Beware of Mortgage Cowboys”. There are lots of mortgage guys out there who will tell you whatever you want to hear. They’ll take the application and get to work on it just to see if it “sticks”. To them, it’s a numbers game, the more loans they try to make, they more they will close. This is extremely risky, and most of these cowboys don’t even know they’re doing it.
It’s always good to shop around for several reasons. First reason, you might find a better rate! Wouldn’t that be nice? Second reason, you might find a lender out there with more flexibility compared to the big cookie-cutter banks. Third, you might find out that you have no business buying a house in the first place!
Don’t try to put up a fight because the Seller calls the shots in a seller’s market, and it most certainly is. Plus, don’t you want the Seller to feel good about picking you over someone else?
Proof of Funds
So, you have a down payment? Prove it! So, you’re paying all cash? Prove it! Why make the Seller uncomfortable and second-guess their decision? How does the Seller even know you’re good for it? Does he know you personally? Do everyone a favor, take two minutes, log in to your account online, and email a bank statement that shows your balance to your agent. Simple as that.
This one is less common, but still interesting. Sometimes the Seller just wants to see your Credit Score. Sometimes they want to see your payment history and size you up. Sometimes they do this instead of having you get approved with their own lender.
This is solely for your benefit. It’s your one chance to make an impression on the seller—especially if you don’t have the strongest offer or the highest price. Real Estate is an emotional business. You’re buying someone’s home where they raised their children, where they laughed and cried, and spent Christmas mornings. They want to make sure you will love it as much as they did. Even if it is a flipped house, this investor walked into this run-down home, and completely rehabilitated it and made it shine. They put a lot of thought and consideration into how families will spend their lives in there. Yes, it is about the money, but we’re all human. Give a little tug on those “heart strings”.
Don't you dare wait until the day you want to make an offer to start all these things. Everything should be ready to go, and all you're waiting for is the right house. Even if your offer is the only one the Seller is considering, don’t you want it to be an easy decision for them? Of course you do.
So, you should go out of your way to eliminate any concerns they have about you and your offer. Your loan is as good as gold. You have the cash ready to go. Your credit is in good shape. And, you’re “worthy” of living in their home. You want them to immediately respond with “Yes!” Not to mention, once you open escrow, you might need the Seller’s help with something, so make sure you’re off to a good start.
In real estate, we call this the “Spirit of the Deal”.