Money In The Bank:
Recently we encountered a situation that would have been the financial equivalent to “jumping off a cliff.”
A Buyer walks into an open house and likes the home. The listing agent says, “would you like to make an offer?” The Buyer says, “yes.” The agent notifies the Buyer there is another offer on the table and the agent proceeds to prepare an offer to send to the Buyer. The Buyer calls me up and asks for my opinion. She states she felt the listing agent didn’t have her best interest at heart, but loves the home and doesn’t want to lose it to the other Buyer. I suggested we have a meeting to discuss further.
After about an hour, we had gone through the offer and were just about to sign when I asked the toughest question of them all, “are you approved for financing?” Asking somebody about the size of their bank account isn’t always easy. We can’t assume a Buyer has money in the bank. She went on to tell me she had spoken to the bank and had been pre-qualified. Meaning, she had a preliminary discussion with the bank and was given a rough idea of what she could afford.
STOP! There is a big difference between pre-qualified and pre-approved. Pre-approved is almost money in the bank, as the bank at that point has done proper due-diligence on your financial background and can make an informed decision in advising you as to what you can afford.
It turns out this Buyer did not disclose everything to the bank during the initial pre-qualification discussion. If she had proceeded with buying the home, unconditional on financing, it would have been the financial equivalent to “jumping off a cliff.” This was a home she desperately wanted, but could flat out not afford to purchase.
An experienced Realtor or Mortgage Advisor can help you with these sorts of situations. Ask questions. Have deep discussions. And never assume it’s money in the bank! — Matthew J. Regan
