This is the final part of a three part serious on how to win in a situation with multiple offers.
Reasons why NOT to use a big box lender in a multiple offer situation
In situations with multiple offers, if one buyer is getting a mortgage and another buyer is paying all cash, the seller may not necessarily accept the all cash offer. The goal of the seller is to sell the property. The seller, with the help of the seller’s agent, will want to accept the best offer to get to the closing table. I have already discussed the terms of an offer can win against multiple offers and how a Realtor can provide an advantage against multiple offers. However, if a buyer uses the wrong mortgage lender, it could cost time, money, and the home.
When I write “the wrong mortgage lender,” I don’t mean one lender is bad and to stay away. In a competitive market, where inventory is low, having a reliable, easily accessible mortgage lender can mean getting to the closing table. The low rates offered by big box lenders can be very attractive but the underwriting guidelines are strict and unyielding. By big box lenders, I mean Bank of America, Wells Fargo, Chase, etc. and other large banks who do not keep their loans in house. When a buyer gets a loan from one of these banks, the bank in turns sells the loan to Fannie Mae or Freddie Mac. In order to sell the loan, the loan has to follow certain guidelines. The process to follow these guidelines is painstakingly slow and, with larger mortgage lenders, buyers do not have one person handling every part of the mortgage process. Our buyers have used a variety of lenders but the smoothest transactions by far were when our buyers have used either Guaranteed Rate or First Republic. In fact, one deal was saved when Guaranteed Rate stepped in after Bank of America could not approve the loan.
Due to the strict underwriting, big box lenders have had to delay a closing date for some buyers if the situation is unique in some way (not FHA approved, appraised lower than asking price, the buyer is self employed, or from out of the country, etc.). As I mentioned before, the seller’s goal is to sell the property and the seller’s agent will help sort through the offers to find the one to get to the closing table and offers the best terms. The seller’s agent and, in this age of information, the seller know big box lenders are more tedious to deal with. If another offer has an offer letter from a mortgage lender the seller’s agent and the seller know will get the job done, that offer will hold more weight.
- Inflexible Processing Time
A buyer who submits an offer with flexible terms will be attractive to the seller. But in order for a buyer to have flexible terms, the buyer needs to know what options the lender can offer. With a lender such as Bank of America, a buyer would not be able to offer a closing date less than 6 weeks from acceptance.
- No Waiving Mortgage Contingency Option
If the buyer wanted to use a larger lender, waiving the mortgage contingency would be an incredibly risky move on the buyer’s part. The property would not likely be able to be pre-approved by a larger lender prior to submitting an offer, so the buyer would have to hope the property is approved afterward which could take weeks and leave the buyer’s deposit vulnerable. Smaller mortgage lenders are more involved with the local community and know the real estate market specific to their area. This benefits the buyer because the lender will be able to anticipate any problems which could affect the loan or the lender will able to pre-approve a property in as fast as four days.
Situations with multiple offers may not continue to happen as consistently as is now the case, but rare and unique properties will always have more than one interested party. When a buyer has to have a certain property, who the buyer uses and what terms the buyer offers can make the property home.