What Home Sellers Need to Know About Mortgages

While in today’s real estate market individuals who are selling their homes may opt for the highest offer in order to finalize the sale, experts are saying that waiting it out may actually be a smarter choice.

Kris Berg, real estate broker at San Diego Castles Realty says, “One of the first things we address is how strong the buyers are financially and how confident we feel that they’re able to close.”

It is always a good idea to weigh out various factors, including how financially stable the potential purchaser is, as this will allow the seller to make an informed decision rather than ultimately wasting their time.

Cash Only Offers

While cash offers at first may seem like a win-win situation, it is important for sellers to take into consideration why they are being offered cash only. Typically, most cash offers are due to the fact that the purchaser cannot obtain financing. Another reason may be that the appraiser believes property value does not match up to the purchase price, which in turn leads to the lender rejecting the financing request. With cash, there are no lenders in the picture, and this in turn takes away both of these risks.

Additionally, sellers should be aware that just because they are being offered cash, it isn’t always guaranteed. Cash offers are popular in the “home flipping” area, and many purchasers are just looking to purchase the home at a discount, sell it off quickly, and actually only occupy the home for a short period of time, if at all. Cash buyers almost always expect a discount as well, so sellers must take this into consideration.

Prequalification Letters

Pre-qualification letters sound great at first, as they are basically letters stating that potential borrowers have pre-qualified for a home loan. However, with pre-qualifications, it is important to read between the lines in order to determine whether the pre-qualifications or “prequals” are actually credible. Many buyers are actually on the edge of not qualifying, and they in turn are characterized as “barely qualified.” This can make a big difference in the long run, so it is important for sellers to request that their agent communicate with the buyer’s loan officer to learn exactly how “qualified” the buyer actually is.

The Stigma of FHA Loans

Unfortunately, many sellers immediately reject offers from buyers who want to finance through an FHA or VA loan. While this should actually be considered a positive since all FHA loans are properly insured through the Federal Housing Administration and VA loans are backed by the Department of Veterans Affairs, the problem is that these agencies have regulations that require sellers to make repairs and correct specific home defects.

Additionally, VA loans require that the seller pay various closing expenses that are usually shared between the buyer and the seller, and the amount of these costs may be enough for the seller to reject a buyer who wishes to purchase a home with the help of a VA loan.

Closing the Deal

While there are various opinions on what a seller should accept with cash offers, FHA and VA loans, and pre-qualified buyers, in the end it is ultimately up to the seller. By weighing out the pros and cons of the situation at hand and communicating with their real estate agents, sellers can make an informed decision when it comes to the sale of their home that should prove to be beneficial for all parties involved.

Author: Scott Skyles

Since 1995, Scott has been involved with over $1 Billion in mortgage fundings and is recognized as an expert in residential mortgage lending. Scott is licensed and able to originate mortgage loans in all 50 states. You may follow Scott on your favorite social networks: Facebook | Google+ | Twitter

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