Bryan Vogt 1: Welcome back to Ready Set Sold with your host Bryan Vogt. We talked about a lot of things today. Talked about what you should be looking for when you make contact with an agent. We also talked to the Mayor Her Roach who had some great information which I absolutely loved. I’ve said this before and I said it on the show today but it bears repeating, I’m always amazed at what’s going on in these communities.
We always want to kind of share that insight of what the mayors are doing and the work that they’re doing. What I love about it too is the love that comes out that all the mayors have for their community and what they do and that’s a cool thing. Especially in the Metro East area.
So I want to talk a bit now about the tip of the week. This is something that seems to be coming up too often and that is the difference between a preapproval and a pre qualifications letter. So just to kind of give you some insight, when you get an offer in, it’s expected that a letter from the lender is going to come. That’s either going to say it’s a prequalification or preapproval.
Preapproval is what I call show me the money. Preapproval means that they actually have turned in their documents. Someone has looked at it and the lender says, “You’re good to go.” It’s gone through underwriting. It’s a very simple process for most buyers. I highly encourage you if you’re looking to buy a home to get that done.
It gives sellers a piece of mind if the money is there. The prequal is as some lenders say, “It’s not worth the paper it’s written on.” It is usually a verbal communication with the buyer saying how much they make, kind of give them a broad spectrum of what their debt is and they kind of from that point on do a prequalification letter.
The problem that really comes into play is very simple this. 90% of the time, that prequalification is going to work. That’s the confusion part. For agents and also for sellers. However, there’s about a 5% chance, maybe a little bit higher, that that letter is not going to work and that you don’t have the moneys to be able to move forward with it.
Case in point, I just heard a story about someone who moved to Alabama. They bought a house there. They thought that the money situation was taken care of. That they were going to close the following day. Come to find out that they got the word that the lender did not be able to bring the funds. Devastating news. That 5% is what you’re trying to avoid.
That’s why I’m making sure that your agent has informed you that they either have a preapproval, it means that the money is there. The bank says yes. All you have to worry about now is the appraisal which is usually a snap thing. It’s not usually a problem. Get your house appraise out and that you also can move forward with it.
With the prequalification, it could work. 90% of the time it does but boy that 5% or 10% of the time it doesn’t. It’s the story I just told you. It’s devastating news and you have to start all the way back from square one. So the tip is, make sure your agent is telling you if you have a preapproval or a prequalification and what they’re going to do to make sure that that turns into a preapproval to help you get your house sold for top dollar at that sale.