In an ideal world, you’ll always go with the biggest offer thrown at you. In the real world, however, there are a host of factors you need to consider before picking your final buyer. Whether you find yourself swarmed with offers or are just receiving your first, there are many things to look at. Here we want to try and highlight the most vital aspects you’ll want to make sure you go over when choosing the right offer to accept. Have a look through these pointers for a quick heads up on what to look for.
The first offer has a good chance of being one of your best
One powerful fact about selling real estate is that time is your enemy. The longer your home is on the market, the more appeal it loses. People always tend to back away from property that is not selling, even if they can't see an obvious reason why right away. This dynamic puts emphasis on your first offer, as it is likely going to be one of the best you receive. Don't disregard it just because it's below or just about in line with your expectations.
An offer is made up of more than just the price. You should always check out if the buyer is pre-approved for their mortgage. This is usually the factor that separates the serious contenders from the not so serious. Are they paying all closing fees? What’s their standing on the home inspection contingency? What does the deposit look like? These are some of the key attributes that you can use to weigh up offers against each other.
Your agent should prove very handy at this stage in highlighting the offers that look the best overall. Any offers that look too good to be true in comparison to the majority of others, should be considered with great caution.
The money in earnest can be a great indicator of commitment
When it comes to money laid down, the more the merrier. Buyers that are prepared to offer more in earnest tend to be the ones that are most serious about the property. Small deposits are signs that a buyer could consider turning away from the deal. If this happens when things are far along, you can always consider suing for breach of contract, but how often do you think this course of action plays out smoothly?
You might be dreaming of seeing a bidding war over your home, but the truth is such scenarios can be a stressful time. An abundance of offers is both a blessing and burden. Sorting through a pile of competitive bids can be challenging and time-consuming. Sometimes the best thing to do is let all competing bidders know to submit their absolute best offers by a certain date. You should then decide the top two, and see if the one in second place is prepared to accept being the backup option. They may respond by increasing their offer to better the one in first place or accept your decision to keep them as a backup. Either way is a win for you. If you’re selling a hot property with loads of interest, it's always best to try and secure a bidder as the backup. It’s not an arrangement that can be guaranteed, but having a potential second option is always better than putting all your faith in just one buyer.
Financing versus cash
If a buyer claims they can buy your property with cash without the need for a loan, you’ll need documents proving they have the means to make this possible. By paying in cash the buyer will be cutting out the need for an appraisal from a lender, which is one of the stages where breakdowns tend to occur most.
If your buyer is seeking a loan, pre-approval is king. Pre-approved buyers will have already passed the requirements set by a lender and are ready to have their final loan package handed to them. You should certainly start looking for pre-approval right away if you intend to buy a new home while you sell you current one. It makes all the difference to your offers!
Contingencies allow buyers to escape the deal if certain conditions come up to change their minds. It’s best to aim for buyers will lesser contingencies if possible. They can certainly vary so more often than not you’ll be comparing the contingencies of different bidders to see which one suits your preferences better. One example that many buyers will try and include in their bids, especially in a buyers market, is one that stipulates that they’ll only go through with the buy if they manage to sell their existing house within a certain time frame. As the seller you can request that this time frame be very reasonable, (around 30 days is commonly perceived as acceptable).
Another form of contingency arrangement is an inspection based one. In this case, the buyer has to be granted a certain amount of time in the home to identify any repairs. You’ll then need to fix them before the sale goes ahead. It’s a common contingency that many prudent buyers will look to add to their offers. If they raise any concerns in their inspection, this will usually lead to more negotiation over how much you are willing to pay towards the maintenance needed. In a sellers market where there is strong competition for your property, buyers may adapt their offers to reforgo the inspection contingency in order to gain favor over other bids.
The last contingency we’ll talk about is the toughest to avoid. Financial appraisal contingencies are used by buyers who need a loan to buy your home. The lender will need to certify the value of the home and if the terms they have with their loanee are a good fit. This means they’ll send an appraiser your way to check out the property, calculate its market value and determine if all is hunky dory. In most cases a property is appraised at around the sale price, but if the competition between your prospective buyers has been high, the appraisal may come in lower than the offers you've been receiving. This is where you’ll need to either lower the price, contest the appraisal, ask the buyer to pay the difference with cash or let the sale break down.
Both sellers and buyers will have significant closing costs which commonly include the commision paid to real estate agents. In a buyers market, buyers can sometimes ask sellers to pay all the buyers closing costs as a term in their offer. In a hot seller's market buyers can offer to pay some of the fees for the seller. By offering to pay these fee’s instead of raising their bid, the buyer effectively avoids the need for the appraisal by the loan company to meet a higher final sale price.
Some buyers will leave you a letter or small note expressing how much they love your home. This can be a great little touch that helps buy some emotional favor from you. You just have to remember to always check out the details of their offer before letting yourself fall for them as potential buyers. If their offer ticks your most crucial boxes there’s nothing wrong with letting such gestures help you enjoy the home selling experience!