[quote=kcal09]I’ve made offers with a preapproval letter from a lender and the amount was higher than the accepted cash offer and still they accepted the lower cash offer. Does anybody know why they would rather accept a lower cash offer than a mortgage if it has already been approved?[/quote]

Think of it as a risk/reward scenario.

On one end of the spectrum is a non-contingent cash offer. You are basically guaranteed to close and close quickly. There is a premium paid by the bank for this lower risk and liquidity.

On the other end of the spectrum would be a FHA type deal (or worse, FHA + some sort of state DPA) you’ll have appraisal issues, qualification issues, long underwriting times, buyers could lose their jobs during that time, etc. But the banks get rewarded for that risk by getting a higher price.

Preapproval doesn’t mean the property will appraise, will pass home inspection or that you’ve gone through full underwriting and cleared all the hurdles.