Sellers take a significant risk in accepting an offer. To a buyer, this might not be obvious, because a seller is broadcasting to the world that they are planning to sell.
But think like a seller for a moment. Any acceptance of a sale means that all future sale opportunities will be refused to make the offer work. By going under contract, a seller effectively says, “This better work.”
The best way to get a seller to clearly see the value of your offer is to communicate, “Yes, this will work. Our financing is looking good, as shown here. As long as your home appraises and inspects well, we should close on time.” This puts the burden back on the seller.
An effective finance pre-approval letter will communicate that:
- The buyers have been credit-checked and approval is complete or in process.
- The buyers’ employment has been verified and discussed.
- A debt ratio has been verified, which indicates monthly payment terms will be met.
- Other conditions necessary to obtain a commitment for new financing (such as a satisfactory appraisal).
Effective lender letters indicate that the buyers can perform on their end of the offer. They reduce risk to the seller by communicating how far along in the process the buyers already are. They also make it clear that the experience should be smooth and easy.
Because most sellers hire an agent to represent their interests in the process, it’s important to note that local seller’s agents are notoriously prejudiced against out-of-city (Denver, Boulder, Pueblo) lenders as well as large national lenders accessible by only a toll-free number with some four or five-digit extension. The rationale is that the local lender has a vested interest in performing due to their local reputation, but an out-of-market lender has no vested interest in such performance.
Whether this bias is justified is largely irrelevant. A favorable lender letter from a well-regarded local lender provides significant value for a buyer making an offer, and avoids undo suspicion from a risk-averse seller—if for no other reason that it will likely cost a buyer more money or unfavorable terms in order to overcome that risk.
As a general rule, we do not show buyers who do not have the resources to purchase that day. The purpose of showing comes with the possibility of buying. We have been involved in bidding wars in every year of our real-estate career, in low inventory and in high. We have won some, and we have lost some.
On multiple different occasions, we have participated in negotiations where buyers won with offers that provided fewer net dollars to a seller than other offers. The reason? One buyer had a stronger lender or stronger approval. We have not always been on the winning side in such situations. In each of these cases, the listing agent did an unusually strong job of advising their seller, effectively stating, “Congrats, you have sold your house for as much or more than you hoped—now choose the offer that will actually close.”
It is vital that a buyer broadcast to sellers that they are not just ready and willing to purchase, but that they are able.