Sharon Mayna…, Home Buyer in Sarasota, FL

When bidding ona shortsale or foreclosure is it best to have a pre-approval letter or an approval for a mortgage? Is an approval as good as cash?

Asked by Sharon Maynard, Sarasota, FL Tue Jul 19, 2011

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Hi, Sharon!

The only thing necessary for a short sale is a preapproval letter - short sales can stretch out for several months (even a year) and your personal situation can change in that time. At the very least your approval will expire and you'll have to start over, anyway.

Another down side to issuing a full approval letter at the time of short sale offer is that it can release the financing contingency; if your situation should change and you can't get the loan when it's time to purchase, your escrow deposit can be in jeopardy.

That said, approvals are great for foreclosure offers! Banks love to see fully approved buyers who can close quickly, and that can influence their decision. These offers are still contingent upon appraisal (which eliminates a lot of the magic of a cash offer) but they're still very strong and can be a big plus for your offer.


Alex Krumm
Re/Max Alliance Group
Broker Associate
GRI, Certified Distressed Property Expert
Winner, Five Star® Best In Customer Satisfaction: 2010, 2011

941-234-3597 Direct
941-954-5454 Office
941-341-0192 Fax

alex.krumm@verizon.net
http://www.sarasotapropertygroup.com
1 vote Thank Flag Link Tue Jul 19, 2011
Of course, you should have a pre-approval prior to looking for homes. Once you have the pre-approval you know how much you can qualify for and what your monthly payments would be. Without it you are shopping blind not knowing if you can purchase the homes you are looking at. No a pre-approval is not as good as cash. Cash offers can close quicker and there are no banks that have to qualify the buyer.
1 vote Thank Flag Link Tue Jul 19, 2011
HI Sharon,
My husband and I are both Realtors. we have helped many with short sales and foreclosures. When dealing with banks and negotiators you want to make sure all your ducks are in row with a contract ! You have to have a pre approval or a approval is even better or if cash then proof of funds.With out these you can't get an offer your offer. Banks will look at all offers even a mortgage as long as the numbers work for them so cash isn't always the one hat has to be submitted.. We have done FHA loans for buyers on foreclosures. So if you need some good agents that will work hard for you. Please give us a call or email. We can help you find the home you are looking for.
Best regards,
Nancy Sarajew
Michael Saunders & Co.
941-661-7383
keepinitreal2@comcast.net
0 votes Thank Flag Link Wed Jul 20, 2011
Hi Sharon,

Even with a full lender committment (approval), generally speaking the property must be in acceptable good condition so an ALL CASH offer of about the same price would certainly trump a offer contingent on financing.
0 votes Thank Flag Link Tue Jul 19, 2011
It is MANDATORY to have a loan pre-approval letter on ANY offer to purchase any type pf property. . Regarding a cash offer of equal or even a little lower offer price the addage "cash is king" still holds true.
0 votes Thank Flag Link Tue Jul 19, 2011
Sharon,
The stronger finances you can show the better for you. Pre-Approval is definitely required, but Cash is always the most preferred.
Good Luck!
0 votes Thank Flag Link Tue Jul 19, 2011
Clearly an Loan Approval which states that "the 1040's have been reviewed, the W-2's are on file, paystubs are upto date and the credit scores have been pulled and are __, __, __ " will have much more weight that a pre-qualification which only means "we talked over the phone and this is what the buyers told us (but nothing has been verified)"

Plus if you also add the letter from your bank stating how much is currently available for immediate withdrawal, and a copy of a Money Order for the escrow amount.... that will make a perfect financial packet to submit with any offer.

Tony Vega
Charles Rutenberg Realty
0 votes Thank Flag Link Tue Jul 19, 2011
Sharon,

An approval is not as good as cash. Banks prefer cash deals. For that matter, "regular" (non-short sale) sellers prefer all cash deals, too. A cash buyer should be prepared to show "proof of funds," i.e., a brokerage or bank statement showing readily saleable securities or cash in an amount necessary to close the deal.

You do need a pre-approval letter for a short sale that will be contingent on financing, plus you will need "proof of funds" for the difference between the mortgage and the purchase price to show that you have the cash necessary for closing.

Best of luck.

Maripat & Bob Flood
Michael Saunders & Company
Cell: 941-320-0441
maripatflood@michaelsaunders.com
http://www.bestsarasotaproperty.com
0 votes Thank Flag Link Tue Jul 19, 2011
Hi Sharon,

A full loan committment is your best evidence of your strong financing. Home Banc has given my clients a lender committment letter that was only contingent on the appraisal and it allowed us to beat out other offers.

If you're bidding on REOs then you may also want to consider getting an approval that specifically states you will be doing an FHA 203K, Fannie Mae HomePath Renovation or a Fannie Mae Homestyle mortgage. It's a fixer upper type mortgage that will give the asset manager assurances they will not be bothered by repair requests because the buyer will be able to make any repairs required and put the cost into their mortgage so there's no out of pocket expense. It almost makes your offer as strong as a Cash offer.

Hope this helps.

Fannie Mae Renovation financing only has a few lenders who will do these mortgages, I can recommend Regions Bank for those mortgages.

All the best,
Alma
0 votes Thank Flag Link Tue Jul 19, 2011
Hi Sharon,

A full loan committment is your best evidence of your strong financing. Home Banc has given my clients a lender committment letter that was only contingent on the appraisal and it allowed us to beat out other offers.

If you're bidding on REOs then you may also want to consider getting an approval that specifically states you will be doing an FHA 203K, Fannie Mae HomePath Renovation or a Fannie Mae Homestyle mortgage. It's a fixer upper type mortgage that will give the asset manager assurances they will not be bothered by repair requests because the buyer will be able to make any repairs required and put the cost into their mortgage so there's no out of pocket expense. It almost makes your offer as strong as a Cash offer.

Hope this helps.

Fannie Mae Renovation financing only has a few lenders who will do these mortgages, I can recommend Regions Bank for those mortgages.

All the best,
Alma
0 votes Thank Flag Link Tue Jul 19, 2011
Saron this is a hot topic...and a good question.

First, buyers in general regardless of what type of property or opportunity they are persuing would be well advised to do so with a pre-approvl letter of proof of funds documentation in their pocket. The majority of distressed sales will require this and for a regular sale, it will certainly help the seller view you as a serious contender.

All deals are enhanced by "cash" opportunities. It represents one less hoop the buyer needs to negotiate in the transaction and one less thing the buyer needs to worry about.

From the standpoint of a foreclosure, many banks are leaning heavily toward cash deals and shying away from financed ones. Even to the point of accepting smaller cash amounts over larger financed transactions. We are seeing this over and over.

So to your question about a financed pre-approval compared to a cash offer..... at the present time, your offer of cash would stand a much greater chance of being accepted than a financed one.

We welcome the opportunity to further clarify your question.

Best regards,

Bill

billeckler@michaelsaunders.com
941-408-5363
0 votes Thank Flag Link Tue Jul 19, 2011
What is BEST is to have a Buyer's Agent in your corner:

If you had a Realtor working for youm you wouldn't have to ask these questions!

Buyer's Agents do not cost you a thing, but not have one can cost you a lot!

Good luck and may God bless
0 votes Thank Flag Link Tue Jul 19, 2011
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