Profile picture for rogerwilson

Qualified buyers, Commitment Letter from lender, a good idea?

In selling a home should the seller require a Commitment Letter from Lender.  The obvious downside home could be off the market for weeks.  I don't understand why anyone would not require a Commitment Letter.

  • August 02 2011 - US
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Answers (2)

Profile picture for CallTheSisters
There is a difference between a pre-qualification and a commitment.

A pre-qualification is based on a cursory view of the borrowers financial data.  The commitment comes only after appraisal, verification of buyers income and debt and a screening by underwriting.  A commitment can have contingencies which have to be removed prior to final loan approval.

The commitment can take 20-30 days to get from the bank once the contract is signed.

It is usually pretty standard in the industry that an offer to purchase is accompanied by a pre-qualification from a lender.
  • August 03 2011
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When representing sellers, I always consider an offer with a pre-approval letter (with a $ amount above the list price) a sign of a good qualified strong buyer.  If we receive an offer without the letter, without a $ amount or below the $ amount the seller would counter offer at (if there would be a counter offer), Depending on the circumstances, I recommend they not accept the offer until we get one.  An expection is that we accept the offer with a contingency that they provide one within 3 days.  I our MLS, we have 3 days to take the home off the market once an offer is accepted.  If no letter in 3 days, no acceptance and the home never goes off the market.

When representing buyers, I alway require they get a pre-approval letter with a $ amount at their max price of a home they would consider.  Again this is a sign of a strong buyer.  Strong buyers have a better chance of getting their offer accepted and at a better price.
  • August 02 2011
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