Why sellers follow a buyer’s money trail

Buyers have long needed a mortgage preapproval letter to prove they’re serious home shoppers.

Now, that paper testament isn’t enough. Sellers want a lender’s verbal assurance that a buyer has the financial wherewithal to make the purchase.

A strange confluence of events — many markets seeing multiple offers from eager buyers amid a rocky economy — makes it important “for a buyer to stand out and convince a seller that they will execute as promised,” says Rob Thompson of Coldwell Banker in Colorado Springs, Colorado.

Naked truths

But especially if they’re moving within a tight-knit community where they may know the agents and sellers involved, don’t buyers have a right to privacy?

It’s the process behind the mortgage preapproval, not the actual numbers, such as a buyer’s income, that matter, explains Matthew Martinez of Diamond Group Real Estate in Santa Rosa.

“Some lenders do the bare minimum (in granting a preapproval letter),” he adds. “We want to see if they’ve verified employment, checked bank statements and how close the buyer is on debt-to-income ratios.”

Indeed, nosiness isn’t the aim; ensuring an offer will go through to completion is. In 2020, the National Association of Realtors found 20 percent of purchase contracts were terminated due to financing issues, and an added 12 percent for a related reason: the buyer lost his job.

Reliable lender

“Agents are extremely vocal about their experiences — especially negative — with lenders to other agents,” says AJ Chinn of Platinum Realty in Overland Park, Kansas.

Local lenders are often preferred, notes Jim Whatley of Uber Realty in Fort Walton Beach, Florida. The reason? If there’s a hitch, the buyer’s agent can easily find a person to talk with to push to get it resolved and then have the lender assure the seller.

When agents work with buyers, they often suggest reliable lenders, but buyers are free to choose their own, Whatley stresses.