How To Determine The Best Offer For You
You want to sell your house for the highest possible price. Real estate offers are not always equal. There are many things to take into consideration when evaluating offers to purchase your home. There are many things to consider, whether you're the lucky buyer with multiple offers to purchase your home or you're just getting your first bite from a potential buyer.
There is an old saying that the best offer is the first when selling a house. There is always room for negotiation. This just means you should consider any offer that is made to you, even if it is lower than you expected. This is the real estate equivalent of two birds in a hand. Every day your home is on the market, it loses some of its shine. You could end up wishing you had accepted the first offer, only to find yourself lusting after it for weeks when nobody else has offered.
Negotiation is the key. Most buyers expect a counteroffer. Do not let your pride or ego stop you from making one, even though you feel the buyer is trying to lowball you. It's beneficial to keep the offer alive. The best-case scenario is that you reach terms that you are happy with. Worst case scenario: You get to make another offer. If potential buyers know that you have an offer, it may make your home more appealing to them.
Don't just focus on the price. Are they pre-approved for a mortgage loan? Are they responsible for all closing costs? Do they want to forego a home inspection contingency? Is their earnest money reasonable? Is it possible for them to allow you to take possession within a few days? You will need to add value to each of these items to your offer.
A buyer who makes a complicated offer but doesn't have the means to make it work should be notified. To ensure there are no surprises, work closely with your agent. Some scenarios to consider:
Earnest Is Essential
What amount of earnest money will the buyer be willing to deposit? While it won't affect your bottom line profit, the higher the earnest money deposit, the better. A buyer who is committed to the success of the deal is desirable. A buyer who has only a small amount of earnest money might be willing to leave and walk away, even though they won't have to pay the money or time to sue you for breach of contract.
Multiple Offers
Are you ready for a bidding war? This is the ultimate goal for any seller. It can be stressful to weigh competing offers because each offer has its own unique quirks and potential pitfalls. You want to avoid any potential pitfalls that could lead to a deal being canceled.
Also, you don't want to engage in back-and-forth negotiations. If you are in a multiple-offer situation, all interested buyers should be told upfront to come in with their highest and best offer and given a date when you will consider them all. After you have evaluated all of them, you can order them. If they are interested in being placed in "backup" in the event that something happens with the first-place buyer, ask them. It's not possible to guarantee that they will be available when you need them. However, it is better than trying to get them to reconsider their interest.
Financing Versus Cash
Cash is usually the king. You should verify that the buyer is able to document that they are able to pay cash if they do not require a loan. You've already saved several steps that could have gone wrong, such as the appraisal if there isn't a lender to satisfy. A low appraisal could be a real risk in a bidding war and can lead to a deal being canceled.
Sellers should not focus on buyers who are pre-approved for loans. A buyer who has been pre-approved is someone who meets the lender requirements to get a mortgage. Pre-approved buyers are the best sellers. You should begin your pre-approval process if you are planning on buying your next home.
Contingencies
Contingencies can be described as the buyer's "Get out jail free" card. Contingencies give buyers the option to cancel the deal at any time if they have other plans or if something unexpected happens. As a seller, it is important to have as few as possible. Some can be avoided, while others might not.
A contingency that states the buyer will buy your home if they sell their current home is the first. In slow markets, this contingency may be accepted. However, it should end within a reasonable time period, such as 30 calendar days.
Next is the inspection contingency. The buyer is given a time limit to inspect the house and to ask you to fix any problems they find. This usually triggers a mini-round of negotiations about the amount you are willing to fix or replace in order to keep the deal alive. This contingency is not offensive. In a normal market, most buyers will include it to protect their interests.
However, you don't have to accept it. In a multi-offer scenario, buyers might choose to forego the inspection contingency. A buyer who accepts an offer without an inspection condition will not have to pay any unexpected repairs, and the buyer can walk away.
It's the most likely contingency to come back at you in a bidding battle. It is the financing appraisal contingency. The institution that is lending the money will hire an appraiser to inspect the property and assign value to it. They want to ensure that the house is worth the amount the buyer is willing to pay for it, or at the very least that they have enough to cover the loan requirements.
Homes will usually appraise at or slightly higher than the selling price. However, if there has been a bidding battle, the appraisal may come in lower. You'll be left with no choice.
Lower the price
Contest the appraisal to try to get a better one
The buyer should have cash reserves to make up the difference
Let the deal end
An escalation clause, where a buyer promises to raise the price above all other offers, doesn't always work. They would also need to waive the financing appraisal condition.
Closing Costs
There are many closing costs for the seller, including real estate commissions. But so do buyers. Buyers will often ask sellers for some upfront payment. These costs should be considered when you evaluate any offer. However, buyers may offer to cover some of your closing costs in a highly competitive market. Why not raise the asking price for the house they offer? You can choose to have them pay a portion of the closing costs. The appraisal for the loan won't need to match the higher sale price.
