How to Choose the Best Offer Selling Your Home
Selling Your Home with Ease
Understand the current real estate market trends and recent sales prices to assess offers in a realistic context.
Explore the negotiation potential of the offer and consider the buyer's willingness to work with you on terms.
Evaluate the price, financing terms, contingencies, and buyer's profile to make an informed decision.
As you continue in your journey to Sell Your Home, one of the critical decisions you'll face is how to select the right offer. It's crucial to consider a number of terms and contingencies with offers. In this article, we'll explore key aspects to help you make an informed choice when evaluating offers for your home.
There are a few things to consider when selling your home if you’re trying to choose the best offer. First you need a good understanding of the current real estate market in your area, including housing trends and recent sales prices. Then, evaluate the negotiation potential of offers by considering the number of offers you have and the flexibility of the buyers. Assess the price and financing terms, ensuring they align with your expectations and the market value. Pay attention to contingencies and understand their implications. Finally, consider the buyer's profile, focusing on their creditworthiness and ability to obtain a mortgage. Seek guidance from a real estate professional throughout the process to make sound decisions.
Understanding the Market:
Before delving into offers, it's essential to have a good understanding of the current real estate market. Has it changed since you listed? You should know the local housing trends, recent sales prices, and the average time homes stay on the market.
This information will help assess offers in a realistic context. If you listed at the tail end of a hot market that turned in the past week, you might not want to be as aggressive. Or if you listed in a softer month that is now getting hotter it’s worth understanding you have an advantage.
Negotiation Potential:
Explore the negotiation potential of the offer. How many offers do you have? If you have more than 3 you have an easier time asking for exactly what you want. If there’s just one you should try to negotiate like it’s the only one you’ll have.
I always want a home sale negotiation to be a win-win process. That requires always operating in good faith. When agents or their clients try to screw over a buyer or seller it never works out well.
Take a look at the offer terms, and ask the representing buyers agent if they are open to a potential counteroffer or adjustments. Flexibility in negotiations can lead to a better outcome. A buyer who is willing to work with you on terms such as the closing date or repairs might be a strong contender.
Work with Professionals!!!:
Throughout the selling process, don't hesitate to seek the guidance of your real estate professional. (You should have representation.) They possess valuable market knowledge and negotiation expertise that can help you make sound decisions.
An experienced agent can provide invaluable negotiation advice and assist you in navigating through offers. They know where you can save money and where you’re not. A good agent can earn their commission check in defending your interests at the negotiation table.
As a follow up, don’t hire jerks. This is blunt, but buyers and sellers need to understand that having a argumentative, cagey real estate agent doesn’t help them. I want to work with good professional agents as they make my job – and my clients lives – easier.
I try to avoid the ‘jerks’ in my market, or I have every defense up, ready to push back on every little negotiation. What you may see as a ‘pitt-bull’ agent ready to defend your interests, is actually a deterrent towards decent agents that want to work with your property.
Evaluate the Price:
The price offered for your home is naturally a major consideration. Look beyond the dollar amount and assess how it aligns with your expectations and the market value. Did they give you what you wanted? Is it reasonable?
A competitive offer should be close to your asking price or even exceed it, indicating genuine interest from the buyer. Consider consulting with a real estate agent to help you determine if the offer is fair and reasonable.
Consider that it might be on the other side of reasonable – it might be too much. That sounds fun but sellers never saw that money. These buyers would offer $60k-$100k more than a property was worth to win the offer – fully knowing that the appraisal was going to pull that back and they wouldn’t actually pay that amount.
Make sure the amount is reasonable. Especially if the offer has a financing contingency attached.
Consider the Financing Terms:
Besides the price, the financing terms of an offer can greatly impact your decision.
The type of financing they intend to use can make the process easier or more challenging. Cash offers may provide more certainty and a quicker closing process. Understand the buyer's financial position to evaluate the offer's reliability.
If they haven’t already, have your agent contact their loan officer. They can ask questions about the mortgage officer’s experience, the buyers qualifications and where they are in the underwriting process.
Understand that buyers can be pre-approved for a mortgage, which is a loan officer asking for basic information. They can also be fully underwritten – meaning that they have disclosed tax documents, payroll stubs and all other details the mortgage company needs to approve this person for a loan.
Contingencies and Conditions:
A contingency refers to a condition or requirement that must be met for the sale to proceed. Most contracts have at least one, and most likely three. As a seller, you need to think of these contingencies as the hurdles you need to get over to go to closing. Chose the best offer with the fewest contingencies.
Common contingencies in a home sale may include:
Financing Contingency: This contingency enables the buyer to get mortgage financing to purchase the home. It typically specifies a certain timeframe within which the buyer must obtain a loan commitment. If the buyer is unable to secure financing within the specified period, the contingency may provide an opportunity to cancel the contract without penalty.
Home Inspection Contingency: This contingency gives the buyer the right to have a professional home inspection conducted on the property. There are multiple things that they can ask to inspect. If significant issues are identified during the inspection, the buyer may request repairs, credits, or negotiate a lower purchase price based on the inspection findings. The contingency allows the buyer to back out of the deal if the inspection results are unsatisfactory.
Appraisal Contingency: This contingency ensures that the home is appraised at or above the agreed-upon purchase price. If the appraisal comes in lower than the purchase price, its almost an all bets are off situation as everyone comes back to the negotiation table. The buyer can renegotiate the price or terminate the agreement if the seller doesn’t agree.
Sale Contingency: In some cases, a buyer may need to sell their current home before being able to purchase a new one. A sale contingency allows the buyer to proceed with the purchase only if they are able to sell their existing property within a specified timeframe. If the buyer fails to sell their home within the agreed-upon period, the seller may have the option to cancel the agreement.
Contingencies are typically time-limited, meaning that the buyer must satisfy the conditions within a specific period. It's crucial for both buyers and sellers to understand the contingencies included in the contract and their implications on the home sale.
As we constantly state: working with a knowledgeable real estate agent or attorney can help you navigate these contingencies and ensure a smooth transaction.
Earnest Money and Deposit:
The earnest money or deposit demonstrates the buyer's seriousness and commitment to purchasing your home. A higher earnest money amount typically indicates a stronger offer. It's important to verify that the earnest money will be held in escrow until closing and understand the conditions under which it may be forfeited.
Earnest monies are often overemphasized by sellers, as something they immediately get if the buyer doesn’t perform. The reality is that most of the time, the funds aren’t released without the buyers approval… so they hang in legal limbo for ages in contested transactions.
Rent-Back and Post-Occupancy Agreements:
In some cases, you might need a rent-back or post-occupancy agreement. This arrangement allows you, as the seller, to remain in your home for a specific period after the sale is completed. You can become a renter in your own home for up to 60 days if you need time to transition to your next home.
It’s important to carefully consider the terms and conditions of such agreements. Rent-back agreements can be offered for free or they can cost the daily amount of the buyers PITI – principle-interest-taxes-insurance.
Assess the duration, rent amount, and any potential liabilities or responsibilities during the rent-back period. While rent-back agreements can provide flexibility, make sure to weigh the advantages and potential drawbacks before agreeing to such arrangements
Review the Buyer's Profile:
Take a moment to understand the buyer's profile. Are they a first-time homebuyer, an investor, or someone relocating? Consider their motivations and how they align with your goals. A well-qualified buyer with a lease ending in X days might be much more likely to proceed with the purchase.
This is a potentially hazardous area, and there’s a reason we put it last. Today we must work to choose offers without any prejudice.
That can be hard to separate for many people. Simple details like – are you single, do you have children, do you belong to a church, and what country are you from – are all irrelevant. These are all Federally classes protected by Fair Housing laws. Meaning if you chose the buyer of your home based off these classes, you could be breaking the law.
So focus on the details that are important - creditworthiness and ability to get the mortgage.
Choose the Best Offer to Sell Your Home
Choosing the right offer is a crucial step when selling your home. By carefully evaluating various factors such as price, financing terms, and their contingencies, you can make an best decision. Remember to consider the current market conditions and seek professional guidance when needed.
Selling your home is a significant milestone, and by selecting the right offer, you can ensure as smooth and successful sale as we can possibly make it.
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