Question: Is a pre-approval letter from a lender a good negotiating tool?

Answer: Yes. Given a choice between a prospective buyer with a pre-approval letter and a buyer without such a letter, a seller knows that the first purchaser has met with a lender, discussed loan options, and probably had a credit check. The result is that the first buyer represents less risk than the second one. If offers from both buyers are largely alike, the buyer with the pre-approval letter is likely to have an edge.