Archive for June 2017

Why Home Buyer Qualifications Matter to the Seller

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Why Home Buyer Qualifications Matter to the Seller

Buyer qualificationsSelling a home is a momentous occasion to say the least, but nothing beats that feeling of getting an offer after all the work that went into listing the home and preparing for each showing. But before popping the champagne, there’s one very important thing a seller needs to understand: an offer does not equal a sale. In fact, there’s a lot to consider before deciding to accept any offers. Do the buyers qualify for a mortgage? What kind of mortgage are they looking for? DO they have a home to sell first? These buyer qualifications may mean the difference between a successful transaction and an offer that will ultimately fail.

Financial Stability

Financial stability is the most obvious buyer qualification the seller should be aware of before executing a contract. A seller should always look into a potential buyer’s financial information in order to gain an understanding as to whether or not they’re qualified to buy this home. Even a pre-approved mortgage is not final, and can ultimately be denied. However, by acquiring a Buyer’s Financial Information Sheet (BFI), a seller can more accurately gauge the buyer’s ability to secure a loan. Simply put, a BFI can be requested by the seller in order for them to see a more detailed picture of the Buyer’s qualifications. This is done by breaking down income, liquid assets, liabilities, employment and more. Using this sheet, a determination can be made as to the likelihood of financing being approved without taking the home off the market.

Buyer qualifications also include employment status and career longevity. Also, determining if the Buyer’s purchase is contingent on them getting a financial gift is also a factor.

Mortgage Type

Traditional mortgages offer competitive rates and allow more flexibility to both the seller and buyer in order to close the deal. For example, if a deal is reached and the home is appraised by the buyer’s mortgage company at a value less than the sale price, the seller may either lower the price, or the buyer may continue with the purchase is acceptable to a mortgage lender. However, with private mortgages, if the buyer puts less than 20% down on the home, they must pay for Private Mortgage Insurance which will increase their monthly payments. This increase in price may prove too much of a financial burden, forcing the offer to be retracted.

FHA loans on the other hand give more protections to the buyer, while also presenting more opportunities for the deal to fall through. If a home is appraised less than the offer price and the seller does not lower the list price, the FHA loan will not be approved. Additionally, FHA loans allow for only 3.5% of the offer to be put down on the home at closing, while approving those with sub-par credit. This can throw up a financial red flag as to whether the buyer is able to pay for the home or if they will default.

Inspections, Repairs, and Maintenance

Inspections are a big part as to whether or not a deal goes through with regard to buyer qualifications. Inspectors leave no stone unturned to inform a buyer of any material defects with the property. Once the report is finalized, both parties have the chance to review it and negotiate what work may need to be done to the house and who will be responsible for completing the work. If the repair and maintenance bills are too much for either party to take on, or if the seller is trying to close the on the house as is, the deal could fall apart. It is critical for the seller to make the terms of the sale clear as to what they are willing and able to contribute towards repairs of the home so the buyer knows exactly what they are getting into.

Additionally, those looking to acquire an FHA loan must have the house appraised according to FHA requirements, which can be restrictive. Something simple as partially peeling paint or a faulty central air unit could result in a loan being denied until these issues are fixed. If a seller chooses to accept an offer with an FHA loan, they may be responsible for any repairs that are required, possibly placing a lot of financial strain on the seller in order to close the deal. Sellers may chose to hire their own inspector before accepting any offer to gain insight as to what may violate the terms of an FHA loan. If no major issues are found, the seller can be more confident in accepting an offer with an FHA loan.

As a seller, there are a lot of factors to look out for before accepting an offer. Once an offer is accepted, the home may be removed from the market as negotiations continue. If the deal falls through, the seller may very well have missed out on another offer being submitted by another prospective. This makes looking at a buyer’s qualifications a crucial factor in accepting any initial offer.

If you’re looking to sell your home, a dedicated Class-Harlan agent is ready to help. They’ll be able to sift through any offer to help find a qualified buyer for your home. Speak with a knowledgeable Class-Harlan agent today!

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