Credit Reports And Bargaining

As very few real estate purchases are actually made completely on cash, it is obvious that most of the real estate deals  on the purchaser's capability to borrow. Hence, it may be said that credit or loan virtually forms the core concern in almost all real estate deals and this is an issue that ought to worry everyone involved - the buyers, sellers, lenders as well as the brokers.

It is quite simple to understand a lender's concern in matters relating to credits or loans. However, the necessity of the sellers as well as their mediators also to acquire information regarding credit is normally seen as an insignificant issue. At times, many buyers consider their interest in such matters is also regarded as an out-and-out invasion of their confidentiality. Nevertheless, it needs to be noted that the sellers too are entitled to information regarding credit, especially if they are asked to withdraw the financing from a purchaser. In actual fact, in such cases the sellers are functioning as lender and are as much entitled as any other lender to obtain information on matters related to credits. Other than this, even when a transaction does not rely on owner financing, the sellers yet have a practical requirement for information regarding loans.

During the process of purchasing a home, one may collect information related to credit from two points. First of all, the necessary credit forms are normally put forward by the buyers while making the purchase offer. Secondly, normally the lender will ask the buyer to obtain an independent credit history from a credit bureau after the deal has been approved.

On the other hand, the buyers regularly dispute that their credit histories should never be disclosed to the sellers owing to the fact that information like this may be utilized by the sellers to weaken their negotiating situation. For instance, if Jones says that his buying offer of $125,000 is the maximum he can pay for and his credit report displays possessions worth $380,000, it is very natural that a seller will possibly believe that he or she can still obtain a higher price for the property.

Frankly speaking, this is basically a hopeless situation for the real estate buyers. It is a fact that exposing one's credit information can actually harm his or her negotiating position. On the other hand, it is also a reality that the sellers have a legal need for obtaining such credit information, and in the process of fighting for negotiating position, this is particular struggle more or less the sellers always emerge victorious. One may ask, why. And the answer is that no offer is ever likely to be accepted by a seller if it is not accompanied by a satisfactory credit statement.

Realizing the fact that the lack of information regarding complete credit would put them at inconvenience, a number of real estate purchasers complete unofficial credit statements comprising data that is factually right, although it may be actually played down. For instance, if a sum of $20,000 is required for finalizing the agreement or deal and the buyer has amount worth $30,000 in money-market account (a savings account that shares some of the characters of a money market fund), he or she may register the money-market holdings or investments as '$20,000 plus'.

However, it is important to note that the buyers can never exaggerate their earning, blow up their possession or make any wrong statements regarding matters based on fact.

In the event of a purchaser attempts to inflate or fake the credit information forms it would result in grave end results. In fact, the buyers put forward these forms to the sellers at the time of making the purchase offer and are normally put together with the buyer's offer. The seller may claim damages for any false claims on the part of the buyer in the credit information application, as the purchaser's offer is protected by a monetary deposit and the likelihood of other damages. This may not only end the deal, but also lead to considerable monetary losses for the purchaser.

In real estate sales that are based on the seller's readiness to withdraw the financing, the deals are usually subject to an evaluation of the purchaser's credit report that ought to be acceptable to the seller. If the buyer's credit report fails to please the seller, the deal finishes or ends without materializing and the seller has to refund the buyer his or her deposit amount.

To Top