Hey guys, we are back in the bonus section today (we only have a couple left in this series!). I’ve been going through the 14 mistakes that I see a lot of new real estate investors make. To catch up on this series, visit my Youtube channel.
#5: When Selling, Not Obtaining A Pre-Approval Letter From The Buyer.
What we’re really doing is reversing the way the normal chain of events goes. Most of the time when you as an investor go to purchase a property, that seller or realtor is going to want to know if you have the money to buy the property. If you’re using a mortgage, they’re going to want to see not just a pre-qualification letter, but a pre-approval letter as well. That means that in the initial process, you as the borrower have been completely approved.
Now if you as the investor are selling and a buyer comes to you wanting to purchase one of your investment properties, you want to make sure they have the funds to purchase. Here’s why: You don’t want to take your property off of the market for 45 days (which is the normal contingency process for a loan to close) without having first verified the fact that that buyer is strong enough financially to actually buy your property.
I primarily look for people who are cash buyers or who have bank lines of credit so they can close fairly quickly. Most of them will still ask for a 30-60 day close if there are extensive repairs needed. They’re still probably going to have outs in their contract based on the inspection. But you should get the financing out of the way first.
The first contingency phase buyers put in contracts is usually related to financing. Financing has to come through. If it doesn’t come through, then the buyer is not liable to close on the contract. The second contingency phase is typically based on inspection. When the inspection takes place, if they find something majorly wrong with the house, the buyer can choose not to purchase it.
So as the seller, you want to try and take care of that first contingency, financing, right off the bat. Ask them to show you a pre-approval letter, a letter from their bank, so that you know they are a strong buyer. Don’t take your property off the market for the wrong reasons.
Another benefit of obtaining a pre-approval letter is that it screens out the less-serious buyers. If you have someone who is just out looking, they may get weeded out when you ask for a pre-approval letter.
This attitude will save a lot of heartache, especially if you have a number of properties and are an active investor, You don’t want to put a property on the market only to take it off and on again based on someone’s financial situation. Instead, get a pre-approval letter and know their financial standing ahead of time.
Thanks for watching! I hope this was helpful. Let me know any questions you have in the comment section and I’ll see you next week.
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