I’ve written recently about how difficult it can be to win a bidding war as a home buyer. I’ve also voiced strong support for using a local mortgage lender to help with the process. What many home buyers don’t realize is that picking the right mortgage lender can help you to win a heated bidding war.
You’re probably thinking, why does the seller care about which lender I use? One bank’s money is just as good as the next, isn’t it? While that is true, you need to look at the decision-making process that a seller and their real estate agent goes through when choosing between multiple offers.
If a seller receives multiple offers for their home, they are probably going to sit down at their kitchen table with their real estate agent and sift through them all. Usually when we are the agent in this scenario, we craft a little spreadsheet to help compare the price and terms being offered by each party.
Usually the seller will begin by excluding the offers that don’t make the cut. Offers that are not competitive on price, contingent on a another home sale or loaded with other seller-unfriendly contingencies are quickly set aside. What’s left is usually a handful of offers that are often very similar on price, closing date and contingencies. That leaves the seller wondering how they are going to pick.
Other than getting the best price, the seller wants to feel the highest level of confidence that the winning offer will get the deal done and close on time. Various factors can introduce risk that the buyer’s deal won’t come together. Very low down payments, inadequate documentation of loan pre-approval or small earnest money amounts can be looked at unfavorably.
The diligent seller’s agent will actually do some homework on the buyer’s loan qualification and choice of lender as well. Sometimes this happens via a call to the lender before they meet with the seller. Other times it happens at the seller’s kitchen table. I’ve been in situations where a seller was deciding between two offers, so we called each lender. What we were looking for is a few things:
- Is the buyer’s lender easy to reach and responsive to our inquiries?
- Has the buyer provided all required documentation to be pre-approved?
- Does the lender see any risks with this particular buyer’s loan application?
- What sort of underwriting turnaround times does their bank have and can the buyer realistically meet the closing date mentioned in the contract?
When you are in a heated bidding war, you want a lender who is “at the ready” to receive questions like this. In fact, you may even have your lender call the seller’s agent ahead of the offer review to pitch what a great borrower you are.
The experience of the seller’s real estate agent can also come in to play here. If we are presented with two offers, one from a bank that we have great experiences with and another from a bank that consistently delays closings, that is going to be the first comment out of our mouths. “We’ve recently closed deals with both of these banks, and while they both will eventually get the loan done, clearly Lender A is way more reliable than Lender B. If I were you, I’d pick the offer from the buyer using Lender A.”
Bottom line, you want a lender who is accessible during the home offer process and can present a strong case on why the seller should pick you, both because of your strong loan qualifications but also because of the bank’s ability to get the loan done in a hassle-free manner. Picking some random lender you found online that has great rates usually doesn’t give you this result, particularly when they are across the country in another time zone and aren’t totally familiar with closing procedures in your state.