Seller-Required Mortgage Preapprovals and the Homebuying Process

Daniel T. Winkler, Clifford A. Lipscomb and Bruce L. Gordon

Journal of Real Estate Research, 2021, vol. 43, issue 4, 447-474

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.

Date: 2021
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DOI: 10.1080/08965803.2021.2003508

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