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Seller-Required Mortgage Preapprovals and the Homebuying Process

Author

Listed:
  • Daniel T. Winkler
  • Clifford A. Lipscomb
  • Bruce L. Gordon

Abstract

Mortgage preapprovals have been commonly available for about 20 years. A buyer may benefit from a mortgage preapproval by increasing the likelihood of closing on the loan. A seller with an offer from a preapproved buyer is exposed to less risk of a transaction not closing and perhaps a quicker average time to closing. The findings show that commercial sellers are more likely to require preapprovals, especially for REO transactions. Time until the closing of a sale (TUS) is about 4.2% quicker for transactions with seller-required preapprovals. Time until the signing of a sales contract (TUC) is not less for seller-required preapprovals, but it is 15.3% quicker for REO preapproval sales. The selling price discount for preapproval properties averages 1.7%–3% for non-REOs and 3%–4% for REO properties.

Suggested Citation

  • Daniel T. Winkler & Clifford A. Lipscomb & Bruce L. Gordon, 2021. "Seller-Required Mortgage Preapprovals and the Homebuying Process," Journal of Real Estate Research, Taylor & Francis Journals, vol. 43(4), pages 447-474, December.
    • Handle: RePEc:taf:rjerxx:v:43:y:2021:i:4:p:447-474
    DOI: 10.1080/08965803.2021.2003508
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