• If sellers require fresh pre-approval, buyers have the right to ask that their offer remain valid during the time it takes for the new approval process.
  • The buyer and his or her Realtor should discuss the specifics of any counter-offers and see if there are parts (or all) of it that are acceptable.

When inventory is tight, every advantage you can give your buyer client to get their offer accepted is key.

Here’s what you need to know about pre-approval and counter-offers in the homebuying process.


These days, when lenders compete on the speed of their pre-approvals, not all pre-approvals are created equal — especially when it comes to documenting income.

Pay stubs and W2s once were considered sufficient proof of income, but now tax returns have been added to the mix, even for salaried employees.

Most borrowers with pre-approval letters from lenders fail for to qualify for a mortgage because they failed to update their financial status between the time that they are pre-approved and they make an offer on a home.

Pre-approvals are usually good for only 60 to 90 days because a borrower’s financial status can change due to a change in the buyers’ debt burden, in income or a change in their credit score.

Most, but not all, lenders require that tax returns be signed. Most, but not all, will also require borrowers to sign an IRS Form 4506-T to give them the authority to obtain a copy of the return, and they will manually review the returns.

Yet rarely does that happen, according to mortgage guru Mark Greene, a loan originator with HomeBridge Financial Services. “Borrowers are wary of sending tax returns and paystubs and bank statements to a mortgage rep to secure preliminary mortgage approval, because they are not in the lender choosing phase of the process — all they want is a pre-approval letter,” Greene says.

A buyer’s offer with a pre-approval based on income data derived from complex tax returns may set off an alarm.

And getting a fresh pre-approval from a lender recommended by the seller may delay the process.

Buyers have the right to ask that their offer remain valid during the time it takes for the new approval process. They also should ask the seller not to penalize them for the lower credit score that will result when the new lender pulls their credit.

In today’s environment, when “pre-qualified” and “pre-approved” are terms that may mean different things to different people, any letter from a lender is only as reliable as the information upon which the opinion is based and upon the competency and veracity of the lender providing the information.

The likelihood of receiving a counteroffer depends on several factors — including whether the local market is skewed in favor of buyers or sellers, how long the home has been on the market, how eager the sellers are to move and whether the offer comes close to the sellers’ expectations.

Typically, a counteroffer will include a higher price or a larger earnest money deposit, a different closing date, a change in the contingencies or the timing of the contingencies, or an exclusion of specific fees. Buyers can accept it, reject it or make a counteroffer in return.

A counteroffer will always include an expiration date. If buyers don’t respond by the seller’s expiration date, the offer is void and the seller can accept an offer from someone else.

What to do with a counter-offer

A buyer’s decision about how to handle a counteroffer will depend, in part, on how much he or she wants this particular house.

If the buyer is fine with the sellers’ conditions in the counteroffer, the buyer can simply accept the offer by signing it.

If the buyer doesn’t like the counteroffer, the buyer and his or her Realtor should discuss the specifics of the offer and see if there are parts of it that are acceptable.

Buyers can make a counteroffer to the sellers with a new price or a different set of contingency dates or a larger earnest money deposit — anything that’s acceptable to the buyer and that could sway the homeowners to sell the property.

Keep in mind that buyers need to stay within the confines of the pre-approved mortgage and that the house must appraise so that its value is equal to or larger than the sale price.

Once a buyer makes a counter-offer to the sellers’ counter-offer, the buyer will be obligated to go through with the deal if the sellers accept it. So, make sure buyers are comfortable with the offer.

The sellers may not respond to the offer. If they don’t and the buyer still wants the house, buyers can make another counter-offer within a week or so to see if it’s possible to nudge them into negotiating.

A buyer’s best resource during this stage of buying a home is your Realtor.

Ask the Realtor to talk to the listing agent and find out what is most important to the sellers — such as the move-out date, the price or perhaps avoiding having to make repairs.

The more you know about the sellers’ motivations, the easier it is to tailor your offer so that it’s acceptable to them.

Steve Cook is editor and co-publisher of Real Estate Economy Watch. Visit him on LinkedIn and Facebook.

Email Steve Cook.

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