Before You Write the Offer: A Buyer-Ready File

The guide in brief

A buyer-ready file: the guide in brief

Here is a plain summary of the main points in Before You Write the Offer: A Buyer-Ready File, written for real estate agents and the buyers they represent. The full guide goes further, with a checklist to hand a buyer on day one. A lender’s letter is not a commitment to lend: the home and the full file still go through underwriting.

A lender’s letter is a to-do list, not a yes

When a file is run through underwriting, the lender does not hand back a clean yes or no. It hands back a list of conditions: the proof still owed. Many deals that fall apart were never turned down; one item on that list simply was not cleared in time. The buyer who answers the same day keeps the file moving. The buyer who goes quiet for a week is the deal that slips, while the letter still looked strong.

Two letters that look alike

A quick letter based on what a buyer tells a loan officer is an estimate. A letter backed by a file where the lender has already checked credit, income, assets and debts, with a person and the automated underwriting system reading the documents, is a different thing. A sharp listing agent can tell them apart quickly, and with competing offers, sellers often weigh the strength of the letter alongside the price. Ask the lender which kind your buyer is holding.

The appraisal the system may waive

Some things the system decides, not the buyer. On some conventional files, the automated underwriting system offers an appraisal waiver, so no appraisal is needed. A buyer cannot simply ask for one, and it tends to appear more often when the buyer is putting more money down. When you weigh offers, a waiver takes away one of the most common reasons a financed deal stalls. Before you counter, ask the lender whether this buyer’s file is likely to get one, knowing it is settled only when the file is run.

The documents that move a file

Have these clean and ready before the offer, not after:

• recent pay stubs and W-2 forms, or tax returns if the buyer is self-employed;
• recent bank and asset statements, every page, not screenshots;
• a short written note for any large or unusual deposit, traced to its source;
• photo identification for everyone on the loan;
• if a relative is giving money, a gift letter and proof of the transfer.

The self-employed buyer, in brief

Self-employed buyers are where many closing-table surprises start. On a standard loan, a lender does not read the top line of the tax return. It reads the income left after write-offs, adds back paper-only expenses such as depreciation, and averages recent years. When the most recent year is the weaker one, the lender often has to use the lower figure rather than the average. The real calculation changes by program, and a single line on a business schedule can change the answer, so when a self-employed buyer is your deal, an early call with the lender beats a handout. Some buyers whose returns do not show their real income can document it with bank statements or assets instead.

Quiet deal killers

• a deposit that cannot be traced to its source;
• a new debt, or a credit check, that was not disclosed at the start;
• documents that went out of date during a long search;
• a buyer who changes jobs, or buys a car or furniture on credit, part way through;
• a soft letter taken into a strong offer.

For the full list of papers a buyer can gather, see our mortgage document checklist; for each step from the first conversation to closing, see the loan process; and for how a purchase loan works, see home purchase loans.