Do you Match your Preapproval amount to your Offer?

Question

On a recent episode of the BP podcast David Greene recommended matching the amount on your preapproval letter to match the offer price so a listing agent doesn't automatically think they can get more from you. This seems reasonable, but a local, successful realtor that I highly respect says listing agents won't see a higher approval amount and take this to mean you will pay more. They even said if you're only approved for the exact offer amount your offer is less appealing because you're at the top of your credit limit and could pose a higher risk of not closing compared to someone who has more wiggle room in their approval amount.

I know every listing agent could have their own opinion, but does anyone have any strong opinions one way or the or, or are there things I'm not considering?

Corby Goade · Answer

I hate to say it, but they agent you respect is wrong. Your preapproval letter should match your offer 100% of the time and you need to work with a lender that is always available to make those modifications. Heck, the lender I work with preapproves my clients and tells me the max they can spend and then sends me a preapproval letter that I can edit based on that criteria.

I do about 75 transactions per year between myself and my clients and I've never once had a listing agent or buyer reject an offer because they thought the preapproval letter limited negotiations. However, I noticed back in the day when I used to send the preapproval letter with the buyer's max, we almost ALWAYS got a counter offer that was at or close to their limit. In what other negotiation would you tell the other party- "here is the absolute most I am willing to pay," before you even start the conversation?

If you have an agent that doesn't get you a fresh letter for every single offer, they are throwing your money away.

You're playing poker- don't show your cards befor you place your bet.

Doug Smith · Answer

Most investors and realtors I work with ask for this. We actually have something in our loan origination system that allows a borrower or agent to log in and adjust the letter amount up to what we set as a max. That being said, just because they know you can go up doesn't mean you have to. No is an answer. You can always say nope. If you've built a model, trust your math. Just because they set a list price doesn't mean you have to...or should...pay it. Most people we see do, indeed, ask me to set their letter to match the offer, but if you're a stronger negotiator on your side, I've not seen that it matters as much as you might think.