Step 8 - Pre-qualify potential buyers
To successfully sell your property, you need to know if the buyer is financially qualified!
Signing a contract with an unqualified buyer could cost you valuable marketing time and perhaps your sale. Smart sellers always verify a buyer’s financial qualifications before signing a contract. If the buyer does not have a pre-qualification letter, then we suggest you hold off signing a contract until the buyer produces the necessary documentation. Signing a contract without examining the buyer’s financial qualifications is like taking a trip without putting gas in your vehicle - you never know how far you will go!
How do you qualify a buyer?
Qualifying a buyer is a simple process. Serious buyers know that buying a home is a competitive process. Therefore, serious buyers will usually obtain a preliminary mortgage approval before looking at properties. It is easy for buyers to apply for a mortgage pre-qualification letter; they can do so by consulting a lender in our Helpful Pros Directory. The mortgage specialist will check the buyer’s credit, income and debt, and if qualified, the mortgage specialist will provide the buyer with a pre-qualification letter.
Unfortunately, not all buyers that show interest in your property will be pre-qualified; therefore, it is necessary to ask each buyer two simple questions: Are you pre-qualified for a mortgage? Do you have a home to sell? Asking these two questions will tell you quite a bit about the buyer’s ability and readiness to buy.
If the buyer isn’t pre-qualified, then ask the buyer to contact a mortgage specialist or in our Helpful Pros Directory. Buyers with good credit can usually obtain a mortgage pre-qualification letter within 24 hours. As previously mentioned, the mortgage specialist will check the buyer’s credit score,income and debt ratios. They will also verify if the buyer has enough money for down payment and closing costs. To properly qualify a buyer, the mortgage specialist will need to know the selling price of your property and your annual property taxes.
The pre-qualification letter should indicate the type of loan the buyer is applying for and the amount to be financed. For example, is the buyer applying for a FHA, VA, or Conventional type loan? Is the buyer looking to finance 80, 90 or 95 percent of the sale? Determining the financing terms in advance is an important part of the qualifying process and should be indicated in the agreement of sale. When getting pre-qualified, it is a good idea for the buyer to ask for a good faith closing cost estimate; the estimate will help the buyer determine his or her monthly payment and cash required for closing.
If the seller is offering owner financing or willing to hold a second mortgage, then the buyer should provide the seller with a recent copy of his or her credit report. Credit reports will indicate how well the buyer manages his or her money.
In the event the buyer is purchasing your property with cash, then ask the buyer for a bank statement to verify his or her funds. If the buyer is receiving a large settlement from a lawsuit; then have your attorney call the buyer’s attorney for a settlement date and verification of funds. Settlement dates can sometimes be delayed for months or dismissed by a judge at the last minute.
Before accepting a purchase offer, always ask the buyer for a copy of their mortgage pre-qualification letter! Qualifying the buyer is vital to your success. Never sign a contract until you know the buyer is financially qualified!