How to Pick The Best Offer When Selling a Home
How do sellers choose an offer?
Most people automatically assume you go with the highest bid.
It is an exciting time, and it can be tempting to jump on the first or even the highest offer immediately.
But it is best to slow down and look more closely at the offers you are getting.
There is more to consider than the amount being offered. You want to take the right offer for you, which may not necessarily be the highest one.
Whether the real estate market favors sellers or buyers, it is always wise to analyze the offers being presented to you.
When it’s a seller’s market, receiving multiple offers on your property is not uncommon.
Having multiple bids is a seller’s dream because it almost always guarantees the terms and conditions you want.
When it’s a buyer’s market, this, of course, is not always the case. Even in a buyer’s market, though, it’s possible if you own an appealing property, you’ll get more than one offer.
Whatever the case, it is essential to understand how to pick the best offer.
Your seller’s agent should be able to offer some expert guidance.
Here are some of the most important considerations before sellers choose an offer.
1. What Are The Net Proceeds?
The net proceeds refer to the amount of money you will walk away with after meeting the agreement’s terms. There are some things a buyer can request that will reduce the net proceeds of the purchase, which is why it is essential to read the fine print before you commit to an agreement.
Some of the costs that you may encounter include the following:
Seller Concessions
Sometimes buyers will request that sellers make concessions to help cover buyer costs like closing costs and down payments.
The request for seller concessions is often in the form of a dollar amount of the sales price. As long as it is a fixed amount, you will know precisely what you get from the sale.
It would help if you always understood what you will walk away with after concessions before you agreed to them.
Repair Costs After The Buyer’s Home Inspection
Sometimes sellers don’t realize this, but the home inspection is often where there will be a second round of negotiations. Negotiating after a home inspection is quite common, especially when real estate markets favor buyers.
The buyer may discover some substantial issues they did not otherwise know about. When this happens, it is not uncommon for the buyer to ask for you to make repairs or give a price reduction on the house.
Repair Costs After The Home Appraisal
Any buyer who is borrowing money from a lender to purchase your home—which most will be—will have to get a bank appraisal before the lender’s hands over the money.
A bank appraisal can discover issues that must be repaired before the transaction can be finalized. These repairs will come out of your pocket, so they need to be included in your decision on which offer is best.
Unfortunately, sellers won’t know the appraiser’s discoveries upfront when they choose an offer.
The Unknown of The Inspection and Appraisal
Unfortunately, the last two items are not known up-front when the offer is made. Sometimes buyers will waive a home inspection, which can be a substantial perk in an offer.
Keep this in mind when picking an offer. The buyer is telling you they will accept the home in as-is condition. This can be a huge perk when selling a home!
2. Is The Buyer Pre-Qualified or Pre-Approved For a Loan?
Pre-qualified and pre-approved can sound the same to a layperson, but there is a significant difference. A pre-qualified buyer may be able to get the loan—maybe, but it is far from guaranteed.
Getting pre-qualified is much less involved than getting pre-approved.
A pre-qualified buyer may apply for the loan and be turned down. It happens often.
On the other hand, a pre-approved buyer has to go through a more rigorous process. A pre-approved buyer will probably be able to get the loan. Pre-approval is not guaranteed, of course.
There are things a buyer can do to get turned down for the loan even after being pre-approved. But if you choose between pre-qualified and pre-approved, always go with pre-approved.
It is vital to understand the differences between being pre-approved and pre-qualified. When working with a real estate agent, insist that any buyer submitting an offer have a pre-approval letter.
3. What Kind of Mortgage is The Buyer Getting?
Different mortgages come with various potential issues.
Some mortgages allow a buyer with a lower credit score and no money down to purchase a home, while others require a higher credit score and a certain amount of down payment.
There are also specialized mortgages, like FHA loans and VA loans.
While you do not want to rule out a buyer just because of how they obtain financing, you want to know what to expect from different types of loans.
For instance, a buyer with a decent down payment is probably more likely to complete the purchase with minimal surprises than a buyer with no money down.
However, low down payments do not necessarily mean that a buyer is less likely to get a mortgage.
Some buyers may prefer to put as little money down as possible when interest rates are low. The logic is to invest their money in other places to make their money work for them.
You should always find a buyer’s complete financial picture before assuming they are less desirable.
With an FHA or VA loan, there are various requirements that the home must meet before the loan goes through. If your home does not meet these FHA mortgage minimum requirements, you could rush to make changes at the last minute to save the sale.
Here is what you need to know about FHA mortgage approval for your home. VA mortgages have similar requirements.
Ultimately, you want to sell, get your money, and be done with it. But things are rarely so simple. The type of mortgage involved will often indicate how simple or complicated; the circumstance may become.
4. What is The Formal Mortgage Commitment Date?
When sellers choose an offer, they should know the buyer’s financing commitment period.
The formal mortgage commitment date indicates when the buyer should be able to get the money to buy the home. Even when a buyer is pre-approved for a home purchase, there is always a possibility that the loan could fall through.
The buyer could make a mistake with their finances and find that a loan is no longer an option.
That is why a formal mortgage commitment date is so vital. Once the mortgage commitment date is made, then it is much more likely that the loan will come through.
Once the mortgage commitment date has passed, the buyer no longer has this as a “contingency.”
What this means is if the buyer lost their mortgage commitment before closing, you would be able to keep their earnest money deposit.
You want to look at the commitment date and verify that it works for your schedule. A date that is two weeks away means you can probably close quickly.
A time frame that is three months away will involve a lot of waiting and should have you questioning why it is so distant.
5. How Much is The Earnest Money Deposit?
As mentioned above, the buyer should be putting down earnest money. Earnest money is essentially what an escrow agent (typically the listing agent) holds in an escrow account until closing.
This money is to ensure the buyer performs under the conditions of the contract. If they don’t perform, this money is refundable to the seller as liquidated damages.
There are circumstances when a seller can keep earnest money and others where they can’t.
Of course, the amount of money held in escrow becomes essential. The more money held, the less likely the buyer will walk away from it.
The typical earnest deposit ranges from 1-5% of the sales price. The more you can collect, the better.
If one buyer is only putting into escrow 2 percent and another is putting in 5%, all other things being equal, the 5% buyer is more attractive.
6. What Closing Time Frame Works For You?
A percentage of sellers will place significant importance on choosing an offer based on their desired closing date.
Some sellers can wait indefinitely to sell their homes, while others must do it as quickly as possible. Most are somewhere in between.
You need to know where you are on this spectrum. What are you planning to do once the home sells? Are you going to go and buy another one immediately, rent, or travel?
Closing within a specific time frame will be vital if you need to finish the sale and move on. It may be more important than the price.
Closing dates are typically one of the most critical terms in a real estate contract.
The closing date could become critical, especially if you are buying and selling a house simultaneously. You may be trying to time your sell and buy for the same day so you don’t have a double move.
Many sellers hate renting a storage unit, and with good reason – it’s a pain in the ass!
You might consider taking a little less for your home if a buyer can meet your desired closing date.
7. What are The Contingencies?
A buyer can attempt to put all sorts of contingencies into a contract. While you may get a great offer, you may also discover that the buyer requires you to do A, B, and C before you get your money once you read through the agreement.
Do you want to go through the hassle of meeting these requests? Or do you want to take less money and get the sale over?
Know what is most important to you, and make your decisions based on your priorities. For example, you might get a great offer from someone, but they have a home sale contingency in the contract.
While on the surface, their offer amount may seem fantastic, a home sale contingency means you might end up with nothing.
The is no guarantee the buyer will ever sell their home. By accepting a home sale clause, you take control of the transaction out of your own hands.
You have no idea if the buyer’s home will be priced correctly, marketed well, or sell in the time frame you are looking for.
The Most Common Real Estate Contingencies
In most real estate contracts, however, there are more common contingencies in addition to the mortgage clause. Some of these contingencies include the following:
General Home Inspection
As mentioned, home inspections often result in the original sale price being re-negotiated. Unless it is an extreme seller’s market, the buyer will likely have a home inspection contingency.
A Radon Inspection
Radon is a radioactive gas that comes up through the earth. It is a known carcinogenic. Most buyers will want it remediated if the levels fall above the EPA guidelines of 4.0 pCi/L.
Remediation costs generally fall within $1000-$2000, depending on how difficult it is to install a remediation system.
A Well Water Inspection
If a home is not serviced by public water, it is not unusual for the buyer to test the well for quantity and quality. Buyers expect to drink safe water and get enough to service the needs of their household.
Mold Inspections
Mold has become a serious health concern for many home buyers. Quite often, buyers will test for the presence of mold in a home. A limited number of buyers will not require the mold to be remediated when found.
Radon in Water Testing
While most people check for radon in the air, fewer buyers check for radon in the water. This can be a mistake as radon is much more expensive to remove from water. On average, you are looking at around $5000-$6000.
Check For Lead Paint in Older Homes
Homes built before 1978 may or may not have lead paint. Buyers who have children under six are required to remove lead paint from a house. A seller must understand the federal lead paint law, especially when selling a multi-family home.
Miscellaneous Contingencies or Inspections
There could be many other things that a buyer may be interested in checking out or adding to the contract. Each one should influence your decision for choosing an offer.
The best way to look at a contingency is a hurdle—the fewer the complications in a transaction, the better when it comes to selling a home.
When a seller asks if it is a good idea to have a home inspection before selling, the answer is mostly yes. You can take many of these issues off the table.
Hopefully, you realize that picking the best offer when selling a house doesn't always come down to price.Click To TweetWould it be worth it to take a few thousand dollars less from a buyer with no contingencies in their offer? I hope you are nodding your head in the affirmative!
There are a lot of factors that go into picking the best offer when selling your house. Take the time to review the proposals carefully and choose the one that best suits your life circumstances.
A Cash Offer With No Contingencies Could Influence Your Decision
You might receive a cash offer on your home with no contingencies. If that happens, it may be worth accepting less money. As-is cash offers take away much of the stress of selling a house.
They increase the odds of a guaranteed home sale. Cash offers are often chosen when you need to sell a house fast. Best of luck choosing the best offer!
Additional Home Selling Resources Worth a Look
- Understand remodeling trends when selling your home – it is essential to know what is in and out when it comes to remodeling, especially if you think you may be selling soon.
- Create a backyard home buyers will love – learn what it takes to create an environment around your house buyers will love.
- What to know about remodeling your kitchen when selling – see what to do when it comes to remodeling your kitchen.
Dig into these excellent resources from other top real estate pros around the country.
About the author: The above Real Estate information on how do sellers choose an offer was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 37+ Years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
