Is it necessary to get pre-approval before submitting an offer?

Question

Hi all! New member and investor here. I'm curious if you need pre-approval before making an offer on a mobile home Park, or just put in the offer and figure out financing later? Or does it depend on the seller? I might be crazy for considering making a MHP my first investment but the deal seems like a can't miss opportunity and I want to act fast. Thanks!

Tyler Wagner · Answer

Thanks for the advice everyone! I could come with about 4% on my own currently. At what point are the financials for the property strong enough for it to be feasible for that to work? Is there a certain cap rate that would give me a good chance? The property also has an asset worth about 20-30% of the purchase price that can be sold off so maybe I could leverage that?

Sid Leibowitz · Answer

You can always make an offer without a bonafide pre-approval letter from a bank.  however the seller may not take you too seriously if you can not show that you have the funds to proceed. There have been a couple of times where I was I had offers on SFR's and from what I considered to be bonafide bidders only to to find out three weeks later that the money vision of the buyer fell through. So, I was tied up for three weeks with a failure at the end and luckly had three more bidders in the wings waiting who jumped in. The second was playing the discounts game with me and inspector who said it needed work that was not necessary for the sale and I dismissed them as well before accepting a pre-qualified offer and the the deal went through However; not before six weeks were lost with unqualified time wasting bidders.

Marc Faulkner · Answer

You DO NOT need to get pre approved before you make an offer.  IF the deal is good enough you will ALWAYS find the money.  I hope it works out!

Matt Boettinger · Answer

You don't need it necessarily but it is good to at least know what your options are so you can accurately underwrite the deal to see how profitable the park would be with financing.

Alex Deacon · Answer

@Tyler Wagner In order to negotiate the best price and to expedite the process and beat out other buyers who don't have their pre approval or Proof of funds in hand its best to have all your ducks in a row. Also sometimes on corporate listings and foreclosures the seller wants to see your LLC or corporation docs before presenting an offer.

Best of luck on the MHP.

Bob Okenwa · Answer

@Tyler Wagner

You're better off figuring out the financing first. The selling agent will probably ask for proof of funds upon submitted requests and if you can't show you're a serious buyer, you're offer will probably be rejected.