Proof of Funds and Pre-Approval Letters When Buying and Selling a Home in the Long Beach Island Real Estate Market
The LBI real estate market has been experiencing a period of improved prices and improved market activity. While this is largely positive, it does create a situation where some transactions fall apart due to lack of funds or financing. A real estate transaction can fall apart for a number of reasons however it is in the best interests of all involved to minimize the risks. One easily avoidable pitfall of a transaction is ensuring that the buyer will not be turned down for a mortgage. While this is thankfully rare, it is beneficial to understand why sellers should verify buyers in the LBI NJ Real estate market.
Why Sellers Should Verify Buyers in the LBI NJ Real Estate Market
The benefits to a seller in vetting a potential buyer are more or less obvious…a seller wants to make sure the buyer can complete the transaction. There are a few ways to do this and the best method will largely depend on the terms of the transaction.
Proof of Funds
- Pre-Approval or Pre-Qualification Letter
- Non-Refundable Deposits
Proof of funds can apply to two different scenarios. First, the transaction will involve some sort of down payment in the LBI real estate market. It is important to ensure that a potential buyer indeed has funds to be able to make this initial deposit including any closing costs. Secondly, a large percentage of transactions on Long Beach Island are cash deals. It is very important to ensure that the buyer has the funds needed to complete the entire transaction and that these funds are readily accessible. In other words, if the money is intended to complete the transaction is in some sort of highly volatile investment vehicle, there is a chance and market could change in the funds to complete the transaction would no longer be available and additional protective measures may be needed.
They preapproval or prequalification letter is a well known instrument to determine the ability of the buyer to complete the transaction in the LBI real estate market. Prequalification and pre-approval letters are not as commonly used on LBI as they are in a primary home market. Much of this has to do with the assumption that a buyer who is considering the purchase of a second home has a handle on their finances sufficient enough to ensure they can complete such a purchase. That said, requesting a prequalification or preapproval letter has almost no downside and it is worthwhile to request prior to entering a real estate transaction.
Lastly, nonrefundable deposits can, in certain instances, make a lot of sense. For example, if a home is being built as a speculative real estate investment and a buyer, prior to completion, requests changes which could impact the future marketability of a home in nonrefundable deposit is an excellent way for a seller to protect their interests.
Selling a Home in the LBI Real Estate Market
Selling a home on Long Beach Island involves not only a careful understanding of the market and an effective marketing plan, it also involves a thorough understanding of the process and what pitfalls can be avoided. Determining the eligibility of a potential buyer is an essential key step for a listing agent to make which can help ensure the successful completion of a purchase. Understanding why Sellers should verify buyers in the LBI NJ real estate market is a responsible step to take when marketing such a large asset. For more information about selling a home in the LBI real estate market or Long Beach Island in general, contact me and I will be happy to answer any questions you have.
By : Nathan Colmer | The Van Dyk Group
Cell: 609-290-4293 | Office: 800-222-0131 | firstname.lastname@example.org