Home Sellers- What to Consider if Your Buyer is Getting a Loan

Updated: Feb 23


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One of the things I've seen many times with For Sale by Owner transactions are sellers who do not screen their potential buyers when it comes to financing. These quick and simple questions can make the biggest difference in making your transaction a successful one.

  • Will you be paying cash, or have you already been preapproved or prequalified by a lender?

  • (if not paying cash) Can you provide me with the preapproval or prequalification letter?

Why are these questions important? Simply put, if you enter into a contract with a buyer who has not been given the go ahead by a lender, the chances of your transaction closing go down, and your chances of wasting time (and money) go up.


Another consideration that many sellers do not contemplate when screening a potential buyer is the type of loan that the buyer is getting prequalified for. Not all loans are created equal when it comes to the approval process. Of course, nothing is better than a total cash purchase offer, but buyers purchasing with a conventional loan are the cream of the crop when it comes to offers tied to financing.

Real Estate

Why? Typically, conventional loans have the least "hoops" to jump through for approval. Other loan types are government backed which have higher scrutiny on not only the buyer,

but also on the collateral (the property you are selling). USDA rural development, FHA, and VA loans all have these higher standards when it comes to the appraisal. If your home is newer and in top shape, these higher standards may not need to be a big concern, but for older homes, any issues the appraiser notes will need repaired before the transaction closes. Not only could this delay the transaction, but could lead you and the buyer back to the negotiating table to figure out who will be paying for the modifications. As you can imagine, the average time to get a government backed loan approved is longer than a conventional loan.


To boil it all down, screening your potential buyers is all about reducing risk and increasing your chances of a successful and smooth transaction. Not everyone's risk tolerances are the same. Are you willing to take on a little more risk for a higher offer from a buyer being financed by a government loan, or will you only accept cash buyers who may offer slightly less for an easy transaction process? Either way, asking a few simple questions up front can give you the information you need to make an informed decision!


If you are ready to sell your home as a for sale by owner, but need more advice like this as you go throughout your transaction process, contact The Selling Table to help you make the most out your experience!


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