CHOOSING THE BEST OFFER FOR YOUR HOME
Sell your home like a pro, get the dough with the best offer in tow!
There can be a lot of stress involved in selling a home. You may find that real estate professional’s knowledge and experience do not necessarily compensate for their hefty commissions. The purpose of this article is to help those who decide to go it alone!
Your home may seem priced fairly if you’ve researched similar homes in the area and researched previous sales. Give it another thought. It can be just as challenging to decide what to ask for your home as it is to choose the best offer.
You should be aware that the majority of offers will be below your asking price. The first step to evaluating an offer is to know what you need. Prior to weighing offers, take into consideration your financial obligations so you can determine the lowest price you can handle.
If you want to sell your home, it’s important to think about the compromises you’re willing to make to accomplish the deal. It’s easy to let emotions play a role in decisions that should be made based on logic if you haven’t done this theoretical work in advance. Consider these factors before accepting a home offer if you are trying to decide which one to accept.
WHAT TO LOOK FOR WHEN JUDGING AN OFFER
The next step is to evaluate each offer after you have considered your finances and determined what matters most to you. The highest offer isn’t always the best one when making a decision such as this. When assessing whether an offer is worth accepting, there are several factors to consider.
Comparison of the offer price and net proceeds
Avoid getting distracted by offer prices when reviewing them. Offer prices aren’t what you’ll walk away with. For a comprehensive understanding of what concessions the buyer is asking for, you must read the offer in its entirety. In addition to closing costs, broker’s commissions, repair costs after a home inspection, etc., concessions can come in other forms. To calculate your actual take-home pay, subtract the offer price from these costs. In order to decide which offer is best, you must understand the net proceeds of the sale.
Qualifications of the buyer
Each buyer’s financial strength must be considered when judging offers. Buyers who make offers beyond their means ultimately lose out to sellers. An applicant’s prequalification does not guarantee that the applicant will be able to obtain a loan. In determining buyers’ qualifications, banks check their credit and obtain a median credit score, but they only provide estimates of their finances.
It is important to check if the buyer has been preapproved for a loan before allowing them to purchase your home. Because preapproval requires verification of the buyer’s income and assets, it is much more rigorous than prequalification.
It can be frustrating to reject promising offers in favor of unrealistic ones. In the event that a buyer isn’t preapproved, you may want to reject the offer.
An all-cash offer
Qualifications of the buyer
All-cash offers are usually the best to accept. Cash buyers are less likely to fall through on their offers when they are able to pay with cash. The closing process is faster when financing is not required. No matter what the circumstances are, the more efficient the closing, the sooner you will be able to withdraw funds and the smoother it will be to move on to the next stage of your life.
These transactions are quick and secure, leading some sellers to accept lower offers that are all-cash rather than higher offers that require financing. Although a buyer may offer to pay in cash, this does not necessarily mean that they possess the necessary funds. It is important to request proof of funds from a buyer who makes an all-cash offer. Accepting a lower offer only to discover that the buyer is unable to honor it is the last thing you want to do.
It is important to check if the buyer has been preapproved for a loan before allowing them to purchase your home. Because preapproval requires verification of the buyer’s income and assets, it is much more rigorous than prequalification.
It can be frustrating to reject promising offers in favor of unrealistic ones. In the event that a buyer isn’t preapproved, you may want to reject the offer.
Possible contingencies
It is important to pay close attention to any contingencies that the buyer wishes to include in the contract when reviewing offers. A contingency is a requirement that a buyer must meet before the sale can be closed. In the event that these stipulations are agreed to but not met, the buyer may withdraw from the agreement.
One of the most common provisions in a contract is the mortgage clause. Upon request from the buyer, this clause implies that the sale is conditional upon the buyer’s ability to obtain financing. Though this stipulation may appear reasonable, it has been known to prevent sales from taking place. Despite being preapproved for a loan, a buyer may not be able to obtain the exact amount required to purchase your property. The most common hiccup when financing a property is an appraisal that comes in below the purchase price. Even though appraisals verify the value of properties, they can sometimes be underestimated in a seller’s market, causing appraisals to come in far below the offer price. A buyer who has a mortgage clause may withdraw from a contract if there is a significant difference between the value of the property and its purchase price, which may leave you scrambling to find another qualified buyer.
The home sale contingency is another important contingency to be aware of. In exchange for this contingency, buyers agree to purchase your home only if they are able to find a buyer for their own. As a result of this provision, there is no way to ensure that their property will actually sell – and if their property does not sell, yours will not either. When evaluating any offer get detailed information as to whether the offer is contingent upon the sale of the buyer’s property. Have inspections, repair negotiations, and appraisals been completed for the property? It is extremely risky for the seller if the property is newly listed or has not yet been listed. Thus, the better the offer, the fewer contingencies stipulated by the buyer.
Dates of closing
It is important for a seller to close the sale of their home as quickly as possible, especially if they intend to buy another property with the proceeds of the sale. However, buyers tend to prefer to extend the time frame, regardless of whether they are completing their own due diligence or finalizing the sale of their own house. The time frame for closing is typically 30 – 45 days, but in the case of a cash closing, it may be within 30 days.
It may be prudent to accept a lower offer from a buyer who is willing to close faster if you are aware that time is of the essence. There are many ways in which buyers can delay the closing of the transaction. It is important to remember that the longer buyers drag out sales, the greater their leverage over you will be. A home that has been on the market for a long period of time will have a more difficult time selling. Make sure that buyers who request a delay in closing are serious, as starting over after your home has been on the market for a long period of time may not be beneficial for the sale of your home.
Bidding Wars: What You Need to Know
When there is a low level of inventory in a seller’s market, bidding wars are more likely to occur. Despite the fact that every seller dreams of starting a bidding war for their property, there is little chance that buyers will be enthusiastic enough about the property to repeatedly outbid their competitors and drive up the price. If your home initiates a bidding war, you should be aware of a few things.
What is the best way to handle multiple offers during a bidding war?
When dealing with multiple offers during a bidding war, each offer should be judged on its own merits. You should begin by considering the qualifications and contingencies of the seller. There should always be a high weight placed on strong offers without multiple contingencies and accompanied by strong financial qualifications.
As you review the qualification and contingency statements of the buyers, you will be able to determine which offers are not worth your time. As a result of rejecting some of the offers on the table, you have a number of options at your disposal. It is possible that one offer stands out above the others. For example, the buyer might want to close the transaction quickly or be willing to pay cash. It should be comfortable for you to accept it if that is the case.
Otherwise, you can select a few of the most promising offers and begin negotiating. You may wish to ask all potential buyers to submit their best and final offer instead if you are trying to close the deal as quickly as possible. An offer that includes more favorable terms for the seller is likely to entice buyers to submit higher offers. It is possible that purchasers will waive contingencies or reduce closing times in these circumstances, but it is also possible that they will become frustrated and decide not to purchase the property at all.
Bidding wars: why should you be cautious?
Starting a bidding war can often result in sellers being placed in an untenable position. Attempting to create competition should not backfire, resulting in frustrated buyers pulling out.
Being greedy can lead to some of the pitfalls associated with bidding wars. It is imperative that you never delay your response to offers in order to motivate more buyers to make offers, and that you never use a bad offer as bait to obtain a better offer.
You must take into account the buyer’s finances when participating in a bidding war. A high offer may be made by some buyers who are still awaiting a mortgage approval. It will be difficult for a buyer who requires financing to obtain financing if they make an inflated offer. It is important to keep in mind that lenders will insist on having the home appraised before approving a loan to the buyer. It is possible that your accepted offer may turn out to be nothing more than a pipe dream if the property value is much lower than the offer price.
Would it be appropriate to accept the first offer made on your home?
You may find it difficult to accept the first offer submitted when your goal is to obtain the highest offer at the most favorable terms. In many cases, however, sellers find that the first offer they receive is the most favorable. When sellers receive offers soon after listing their home for sale, it is easy to get greedy and seek a higher price. There are other potential buyers out there who have not seen the property yet, since they received such a strong offer so quickly.
There is a danger of falling into this trap, but it is important to remember that those buyers who attend the first open house and make an offer shortly thereafter are the most serious buyers. They have set up their listing alerts, made it a priority to attend the first open house, and have the necessary documents in order so that they can submit an offer immediately. As a result, they are buyers who will be willing to pay the most for the house because they will gain the most value from it. In fact, the longer it takes for a listing to go into contract, the more discount it ultimately receives to its asking price.
A property that has been on the market for a long time has a higher chance of being difficult to sell. You’ll notice that interest in your home begins to wane after 3 weeks on the market. A property that sits on the market for an extended period of time appears tainted to most buyers. If there are no other buyers interested in it, there’s no point in asking the price. In other words, if you do receive offers after your home has been on the market for some time, expect them to be below your asking price.
Understanding the terms and risks of an offer can help you decide whether you should accept it. The key to selling your home is to decide what you’re willing to give up in order to achieve the best price and terms. There is no one-size-fits-all solution for selling, so what is right for one seller might not be right for another.
Just reading this article may make your head spin, let alone putting it into practice. We have the tools to guide you through the process of selling your home if you find that you need some assistance. If you have questions, you can ask our experts for free, or work with your own Personal Home Listing Coordinator.
How about the buyers?
Be assured that we haven’t forgotten about you, buyers. It can be exciting and exasperating to find your dream home. To make sure the property doesn’t slip away, you need to make a competitive offer. Offer only enough to cover the house’s value or your comfort level. Most buyers prefer all-cash offers, quick closings, and the least amount of contingencies. To strengthen your offer, you don’t have to limit yourself to these options. You can snag that perfect listing by following these tips.
Make sure you research the market before you make an offer
There is no guarantee that a property is truly worth the price a seller lists it for. A comparative market analysis should be conducted on the neighborhood before making an offer on a home. Look at recent sales near and in the area to start your search. It may be difficult to find comparable sales that perfectly match the property you are interested in when researching comparable sales. You should do your research in order to gain a general idea of the market and how much you would need to offer to be considered.
Analyze the comps critically
Comparable sales provide guidelines when determining your offer price, but market research plays an important role. There may be similarities between recent sales and the property you’re interested in, but that doesn’t mean the homes are the same.
Take note of the condition of the comps as you examine them. If the property is in worse condition, you should not offer more money. In contrast, if you are interested in a property that requires less work than those that have recently sold, boost your offer accordingly. The property’s market age should also be taken into account. You should consider the property’s age when pricing your offer if it has been on the market for over a month. A home that has been sitting on the market for some time gives buyers more leverage to negotiate the asking price.
Think about what you need personally
Offers with conditions may be less desirable, but if you do not consider your needs, you may not be able to honor them. It is advisable to include a contingency for the sale of your home if you cannot afford the property without selling your own. Prior to looking for a new house, consider listing your own if you are concerned that a seller might reject your offer. If your property is under contract, you can submit an offer with a home closing contingency. There is more security provided by this contingency, which is why sellers prefer it. With a buyer already in place, you are more likely to have the funds you need to complete the sale.
In the case of financing, the same rule applies. A mortgage contingency clause should still be included in your offer, regardless of how sellers feel about contract provisions. Signing a contract and finding that you are unable to obtain a loan will not be worth it. You’re still responsible for purchasing the home regardless of whether you have the funds.
Instead of taking the risk of losing money, you take a very short contingency period (e.g., 21 days) in which you can get an appraisal done and see if there are any problems with getting a loan if you push your lender. Also, consider a short inspection contingency period (or none at all). Most sellers worry about the buyer tying up their house and then backing out. Making your offer more competitive is as easy as conveying that you will close or, at the very least, back out quickly.
Putting more money in escrow is a good idea
Increasing the amount of earnest money, you offer is an excellent way to encourage a seller to accept your offer. To demonstrate your seriousness about buying the property, you deposit earnest money into escrow. Quite simply, an earnest money deposit is a promise made to the seller, just as a down payment is to the lender. It demonstrates the buyer’s commitment to complete the sale without external contingencies when he or she offers a large earnest money deposit.
Earnest money deposits will increase your offer’s competitiveness. The amount you include, however, should be carefully considered. In addition to making your offer more attractive, these deposits can also put you at risk. The seller gets to keep these funds if you withdraw from a contract for any reason other than one stipulated in a contingency clause.
Immediately make an offer
Real estate transactions require a quick turnaround time. When buying a home in a market with low inventory, you should put in an offer as soon as possible. Getting your offer in early will give you an edge over other buyers who are inundated with other offers. It is more likely that your offer will be accepted if you make it as quickly as possible. Having your documents ready to go will prevent you from competing with other offers. Prior to submitting your offer, make sure that you have received an approval letter. The seller will be reassured that you are serious and can actually afford the house if you receive preapproval.