Knowing (Maybe) What the Buyer Can Afford: How Relevant for Sellers?
As a listing agent (representing Sellers), one of the lamer Buyer pitches you occasionally hear is some variant of the following: “I know the house is listed at (and worth close to) $500k, but I can only afford $400k . . . so that’s my offer.”
The standard Seller retort to that is (or should be): “I certainly respect you staying within your budget, but assuming you really can only afford $400k, shouldn’t you be shopping for a less expensive home??”
(Note: if the house’s fair market value is actually closer to $400k than $500k . . . that’s a different story.)
Parsing Buyer Pre-Approval Letters
Which isn’t to say that it’s never relevant to know what the Buyer’s budget is.
Or more specifically, what they’re able to borrow, assuming they’re not paying cash.
So, as a listing agent, I’ll carefully scan the Buyer’s Pre-Approval Letter (from their lender) to see if the amount they’re approved for exceeds what they’re offering.
To go back to the well-priced $500k home, it would be relevant to the Seller if the Buyer was offering $460k, but their Pre-Approval Letter was for $480k.
Which is why it’s smart to have the Pre-Approval amount match the offer — or leave off a number on the Pre-Approval Letter altogether.
Half a Loaf Really > None? Not to Sellers
Just because a Buyer can go higher doesn’t mean they will.
But, lots of times they do.
Meanwhile, if the Buyer really can’t go higher . . . they can’t.
Got all that?? 🙂
P.S.: The other concern with a Buyer that’s already at the very top of their price range: any inspection and/or appraisal issues that arise later in the deal will be harder to resolve.
