As the value of the dollar continues to crumble so too does the value of the pre-approval letter. For a long time we wrote, as Brokers, a pre-qualification letter and we gave that to the consumer. This letter was the letter that they would show to their Real Estate agent and it would accompany the offer. Then the boom came and Real Estate agents were swamped and so were we so the need for a PRE-APPROVAL letter became the dominant force.
Let me pause for a moment and explain the difference. A pre-qualification letter can be given to any walking soul that states they have a job, decent credit, and some money in the bank. It is generally issued based on a conversation versus documentation. Pre-approval letter's are issued after the loan officer has taken a full application and reviewed the credit report, income documentation and assets. A pre-approval letter is a further form that may even involve an automated approval prior to writing them. (This is what I do in the current market).
So, what I was saying was Pre-approval letters used to mean something when the offer was written. The dollar used to be a force among all currencies also. The dollar has been smacked and the value is much less. In fact that is the conundrum a weak dollar while inflation is an issue. I once called it a double edge sword. I can now say that I feel the same as the pre-approval letter. With the emergence of REO's in the market place it is very common that the bank request a pre-approval letter from their institution. My approval letter has lost all credibility. What I have been having to do is send my approval letter and my findings (automated approval) and most institutions have used this to write a letter for me.
However, I am not always so lucky. As we fight for the deals that are on the table I have had banks want all the information that I used to get the automated approval in their attempt to borrow my borrower. To put this in perspective getting automated findings is like getting a listing appointment, meeting with the consumer, filling out all the paperwork and when you get back to the office handing to another agent for them to do. It is not all the work but it is the hardest work of the process. If everyone could get clients easily everyone would be in Real Estate. It has been my fortune that my clients want to work with me so this is less of a problem.
Pre-approval letters are now virtually meaningless if the property is bank owned. The Broker has lost credibility. Everyone is afraid that the deal will fall through. Honestly, I understand the fear of a deal falling through. Deals have not all fallen through because of Broker misrepresentation. Washington Mutual shut down their wholesale division. If I had my client approved through Washington Mutual and we were in contract moving forward and the bank closes shop unexpectedly whose fault is it? It could happen no matter who writes the pre-approval letter.
In conclusion, just like the dollar has lost value in the market place so has the pre-approval letter. It is the result of a mess of things that are out of our control. I have learned to deal with it but it still bothers me. I am in the business still because I am good at my job. I have a good reputation when it comes to my clients and the people that I work with. I certainly have my faults but overall I am here and closing deals. I am eager to get back to a point where my word has some substance. The same world that my dollar actually affords me a good meal and more than a 1/4 gallon of gas.