Home Buying in Phoenix>Question Details

Nia,  in Phoenix, AZ

Preapproval letter question

Asked by Nia, Phoenix, AZ Mon Mar 23, 2009

We know that if we asked the bank to preapprove us for about 200k or more, that we would be approved. However, my husband says that because he's only wanting to bid up to 150k on a Queen Creek house anyway, that we should ask to be preapproved for around that 150k mark... I told him that the bigger the preapproval amount, the more the selling bank will think that we are less at risk of foreclosing on our home, and therefore we should have the maximum preapproval amount we can get. What's the true answer?

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I just want to add a note regarding the so-called discount (or rebate Realtors)!!!!

Like everything in live there are discounted services and there are full service or good service professionals. On Real Estate services as in everything else, you usually get what you paid for! You have to ask yourself why this agent is ofering his services at a discount! Maybe he has a bad reputation, maybe his past clients are not coming back to him. One thing is for sure, he can not get enough clients the regular way.

When I started working as an investor I once worked with one of those discount/rebate agents. The agent of course was not too good and did not invest the necessary amount of effort representing me - how could he! At the end of the deal I ended up paying almost 5% more for that property than what I should have if my agent have done his homework/work. But I got 1.5% back. That does not sounds like a good deal to me.

Purchasing a property is a big investment - too big to rely on discounted services. BTW, that applies to almost everything in live - Lawyers, car/home repairs, remodeling jobs, plastic surgery, etc...
2 votes Thank Flag Link Mon Mar 23, 2009
I typically get a pre-qual/pre-approval letter that works into the amount the client wants to offer on a specific home. If the client is looking at a range of prices, I have had lenders who will provide 2-3 versions based on amount. Why tell the Seller you can afford more when you are trying to negotiate price? And as mentioned in a previous post, it is a moot point in a Buyer's market such as today's.

The letter has nothing to do with the Seller's lender.
0 votes Thank Flag Link Tue Mar 24, 2009
If you paid 5% too much for a house, that's your fault, not your agent's. Your agent furnished you with comparable sales and shared as much information about the property as they knew. You made a decision on what to offer the seller and they took your offer.

All sellers must net a certain amount in order for it to be feasible to sell.....even on short sales. If there's not enough cash in the transaction, the seller won't sell. It's very, very simple. And no agent can squeeze blood out of a turnip. So get over the discount realtor kick you're on.

Why do I offer a 50% commission rebate. Because realtors are paid too much and I want your business. Realtors typically receive a 3% commission when representing the buyer. Today's buyers usually find the home themselves via the internet. They do a drive-by inspection of the home and neighborhood, and then call an agent to help them with the paperwork, financing, inspections, and other legalities. The realtor usually comes into the game late, so do they deserve 3% of the purchase price? That's a LOT of money - $9,000.00 on a $300K home!

Most buyers don't want to ride around with a realtor looking at a bunch of homes the realtor selected, and listening to sales pitches all the while. Buyers want to be a part of the buying process, and I reward them for doing so. The buyer and I work together in finding the home and going through the purchase process. Buyers absolutely love sharing 50% of the commission - they did half the work, why shouldn't they share in the commission?

I offer my buyer clients FULL service representaion and the benifit of my 29-years in the residential real estate business. I have a spotless record with the AZ Department of Real Estate.

Commission rebates are a new business model that threatens traditional agents terribly. Traditional agents' only defense is the "you get what you pay for" line. Well, let me turn that around. Can a traditional agent tell me with a straight face what they did to earn $9,000.00 on a $300K transaction? And please don't tell me how they "negotiated" a better price.........that's up to the buyer, remember?

Realtors only get paid if the sale closes, so the more they "negotiate" and make things difficult for the other realtor and the seller, the less likely the sale closes. When a "negotiating" agent stirs the pot, his buyer client's best interests are not often served. The buyer agent will benefit their client much more by providing information and recommendations and let the buyer make the decisions - let the buyer be the negotiator.

Today's real estate agent should be all about empowering their client - buyer or seller - and letting them decide what's in their best interest.
Web Reference: http://www.cr-az.com
0 votes Thank Flag Link Tue Mar 24, 2009
HI Nia,

Depends on the seller. If the seller is a private seller, get a customized LSR for the offer amount. If the seller is a bank, then the amount on the LSR doesn't really matter, as long as the amount on the LSR is equal to or greater than the offer amount.

Buyer's Agent Realtor
0 votes Thank Flag Link Mon Mar 23, 2009
Buyers often feel the way your husband does. They tend to feel......if I give the seller an approval letter for $ 200k....the seller will feel....."Well why didn't you offer me more ? You can afford it !"

If this seller is a bank......all they want to know is......you are qualified and you can get a loan to close escrow.

Most seller(lenders) are so busy with foreclosures today, they won't mind if you are over qualified. Also, it's a buyers' market.......so sellers need to base their price on the market.......just be satisfied the buyers can get a loan....
0 votes Thank Flag Link Mon Mar 23, 2009
There are two thought processes here.

#1 If you make the Loan Status Report (LSR) out for the offer amount, the seller may feel that's all you're approved for and thus, you can't pay any more for the house........that's why you offered the amount you did.

#2 If you have your maximum approval amount on the LSR, it shows you're a stronger buyer and more likely to get your loan approved.

So, it's a catch-22.

I prefer a lender put the maximum approval amount on the LSR. I can negotiate a sale best from that positon.

BTW.......I'm a rebate broker and refund 50% of the sales commission to the buyer when they purchase a home through me. Typically, realtors are paid a 3% commission, so I share 1.5% (of the purchase price) with the buyer. On a $150K home purchase, I would rebate $2,250.00 to you. You can use the cash anyway you choose, including paying your closing costs, new furniture, new appliances, etc.

Rebate details are on my website. :-)
Web Reference: http://www.cr-az.com
0 votes Thank Flag Link Mon Mar 23, 2009
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