Why Get Pre-approved? Structuring Your Offer to Get the Best Deal

Buying a home is a dream come true, but the process of getting an offer prepared and accepted can be a nightmare if you don’t know what you’re doing.

There are over 88 variables that need to be managed properly when buying a home and mishandling just one of them could cost you tens of thousands of dollars in unnecessary expenses.

Making a home purchase is expensive enough that you don’t need to part ways with any more of your hard-earned cash than absolutely necessary.

There’s good news: by getting pre-approved and structuring your offer in the right way, you can get the best deal on a home you absolutely love. Plus, now that the market has shifted and put buyers in the driver’s seat when it comes to negotiating a great price for a home, a pre-approval letter is a key element in you getting the best deal possible when you’re ready to buy.

Here’s what you need to do to make that happen.

Your Pre-Approval is Like Having Cash in Hand

Whether you’re competing with another buyer for a home or not, it’s absolutely vital to get pre-approved from a valid home lending institution in hand.

I can’t stress valid enough as pre-approvals from little-known online websites or from a place like Bob’s House of Mortgages and Auto Repair, claiming to have the best rates for a loan, are almost certainly going to doom your purchase down the road. Also, going to a “big box” bank isn’t likely going to get you a great deal, either, as those banks aren’t in the habit of trying to find the absolute best loan product for their mortgage clients.

Also, please know that there’s a huge difference between a pre-qualification and a pre-approval.

According to Realtor.com, here’s the main difference between a pre-qualification and a pre-approval:

“Pre-qualification means that a lender has evaluated your creditworthiness and has decided that you probably will be eligible for a loan up to a certain amount.

But here’s the rub: Most often, the pre-qualification letter is an approximation—not a promise—based solely on the information you give the lender and its evaluation of your financial prospects, and…

Pre-approval...is the real deal, a statement from a lender that you qualify for a specific mortgage amount based on an underwriter’s review of all of your financial information: credit report, pay stubs, bank statement, salary, assets, and obligations.

Pre-approval should mean your loan is contingent only on the appraisal of the home you choose, providing that nothing changes in your financial picture before closing.”

Once you get pre-approved, be sure to confirm with your lender that it’s only subject to the home you buy appraising at the value for which it’s being bought.

And here’s why: when you make an offer to a seller and the only thing that’s required from you financially to buy the home is that the home appraises for the price at which you’re buying it, it’s almost like having cash in hand to buy the home.

A solid pre-approval removes all the doubt from the seller’s mind about whether or not you’ll be able to afford the home and gives you the ability to negotiate, with confidence, to get the best deal for the home.

It literally puts you on the same playing field as a buyer who would buy the home with a cash offer and allows the seller to take you seriously as you negotiate to get an amazing deal on the home.

Always be sure to get pre-approved before you buy a home.

Put Your Best Foot Forward

Once you have your financing in order and you find a home that you’d love to own, there are a few key things you absolutely must do to structure your offer so you get the best deal:

• 1: Do your research

The goal of submitting an offer on a home is to get it accepted so that you can work through the home buying process and end up with the perfect home at the perfect price.

The best way to start this is to make sure that you know as much about the seller and what their goals are as you possibly can. There are lots of things that are important to a seller in addition to the price they’re asking for the home.

Here are the top 10 reasons people sell:

So, in addition to making sure that the home is priced properly, you’ll also want to find out:

• If timing is more important than price (some folks just want to get out of “dodge”, so to speak)
• When they would like to be out of their home
• What they’re wanting to take from, or leave with, the home
• How quickly they’ll be able to look at, and respond to, your offer
• If the price they’re asking is firm or if there’s any room for negotiation
• What else is important to them in the sale of the home

The more information you get from the seller, the better job you can do in preparing an offer with which they’ll want to work.

Do your best to give the seller what they want when you can so that you can get the best deal on the home.

Now, am I advocating that you pay them full price and do everything to their liking.

In short, no.

But if the home is a good deal and the time frame and other stipulations work for you, too, structure your offer so that there’s a great chance of getting it accepted.

And if there are things you need that aren’t in line with what the seller is looking for, then draft an offer that has a true “win-win” feel to it. Make concessions to the seller that you can live with and ask the same of them in return.

Having a peace-treaty mindset where everyone feels like they are giving and getting the same amount almost always results in a great sales transaction for both parties.

• 2: Make a solid earnest money deposit

It’s a simple strategy, the more money you put down as earnest money on the home you’re going to buy, the less likely you are to walk away from it.

Sellers like that.

The good news for you is that you could put the ENTIRE purchase price of the home down as earnest money and get every penny back if things like the home inspection and/or appraisal don’t go your way.

I’m not suggesting you put down that much money, but I am recommending putting down a solid amount so that the seller knows you’re serious about buying the home.

Taking this approach as you structure your offer for the seller can help you get the best deal for the home you’re looking to buy without having to pay extra to buy the home.

• 3: Be aggressive on non-monetary aspects of the home purchase

Real estate transactions can be very emotional events and as such, nobody likes to wait around for things to happen - good or bad. Everyone wants to know if the deal is going to work out as soon as they possibly can so that they can take care of the other aspects of getting moved like packing, setting up utilities, updating address and phone information, schools, etc.

Knowing this to be the case, there are a few things you can do on your offer to let the seller know you are serious about buying their home and aren’t looking to drag things out:

• Shorten dates on home inspections: If you find something wrong with the home, the seller doesn’t want to have to wait a long time and see if it will blow up the deal
• Do no home inspection at all: If the home is newer or if you’re a skilled handyman or contractor, you may not be deterred by something negative that pops up on a home inspection. Sellers love when the home inspection (the biggest deal killer of them all) doesn’t come into play.
• Shorten your financing contingency: Based on our prior discussion, you should be pre-approved subject to a home appraisal before you submit your offer. Get your appraisal scheduled for shortly after the home inspection so that you and the seller know ASAP that the home appraised for full value.
• Limit the number of concessions you ask for: The more you ask the seller to give up, the less appealing your offer is to them. Now, if you need closing costs, then you need closing costs and you have to ask for them. Same thing goes for something that needs to be repaired from a home inspection.
• Close when the seller wants to close: If the seller has a closing date in mind and it works for you, then close at that time. It will go a long way in the negotiations.

Remember, there’s always more to a home sale for sellers than the selling price. Yes, the price is important, but it’s part of the whole picture for what the seller is looking to get out of selling their home.

Buying a home is exciting and if you do the things we’ve laid out for you here, you can make the process exciting and walk away for a great deal for yourself.

Be sure to always get pre-approved and then structure the deal so that it works well for you and the seller.

When you do that, great things will happen for you for every home you buy.