Should Preapproval Letters Be Required for Home Tours?
July 8, 2020
Many home sellers are trying to limit how many people walk through their properties due to the pandemic. As a result, more real estate professionals are suggesting sellers limit in-person tours to only buyers who can show they’ve been preapproved for a mortgage.
A preapproval letter is a written offer from a lender that tentatively approves them for a mortgage and also shows how much they are allowed to borrow.
“Having a preapproval letter has long been a preferred requirement by agents when submitting an offer, but having a preapproval letter before looking at homes given the COVID-19 environment is an absolute must,” Cara Ameer, a real estate professional with Coldwell Banker Vanguard Realty in Ponte Vedra Beach, Fla., told Money. “Sellers and listing agents are cautious about who is coming into their homes, and they want to ensure that only those that are truly qualified are coming through their doors.”
Many home sellers are asking for pre-approval letters, but some also may accept pre-qualification letters too. A prequalification letter is a less involved process where a lender verbally asks for an overview of a buyer’s finances instead of like a preapproval where they review all supporting documentation, like pay stubs, federal tax returns, W-2s, down payment funds, and more. As such, mortgage pre-approvals tend to carry more weight with home sellers than a pre-qualification.
If real estate agents are going to present preapproval letters prior to showings, they must then ask all their buyers to provide proof, says Bryan Greene, director of fair housing policy at the National Association of REALTORS®. “We’ve seen situations where agents don’t appear to apply that requirement consistently,” he told Money. That could raise potential fair housing issues.
Updated: October 23, 2020