Congratulations! You have listed your home and received multiple offers, now what? When it comes to choosing an offer, it is necessary to take a step back and recognize that your bottom line should not be your only consideration. In many instances, the terms a potential buyer includes in the offer are also necessary to consider. They can underscore how many hurdles you will have to clear to reach the closing table promptly. So take time to carefully review an offer—beyond the dollar amount—before settling on a buyer. To help you navigate all this, we have outlined four important factors that home sellers should look for in an offer. Here is everything you need to know about choosing the best one!
Research your preferred financing method
As a seller, you probably have an offer amount in mind that you would like the buyer to meet or exceed. However, a buyer needs to verify that they can afford to make the purchase. If the buyer intends to get a mortgage, they should include a pre-approval letter in their offer. If a potential buyer makes a cash offer, ask for proof of funds before accepting it. This proof will usually come in the form of a bank or investment account statement. Each should show that the buyer has the funds necessary to complete the transaction.
Your timeline also matters! If you need to sell your home in a hurry, you may want an all-cash offer. All-cash offers usually involve less risk and a shorter escrow period. However, seller beware: All-cash buyers have negotiation power. They will generally want something in return for bringing a bag of money to the sale. For instance, they could offer you less than the asking price. Be sure to weigh the cons against the pros before accepting an all-cash offer over a buyer with a mortgage.
Look for a larger earnest money deposit
Consider choosing an offer with a sizable earnest money deposit, also known as a good-faith deposit. A deposit is a sum of money that a buyer entrusts to the seller’s brokerage firm to prove that he is serious about purchasing the home. A deposit that is worth 1% to 2% of the sale price is normal, but the higher the deposit, the stronger the offer. The buyer’s earnest money deposit goes toward the down payment if they eventually close on the home. On the other hand, if the buyer breaks the contract, you can potentially keep the deposit as a consolation.
Consider fewer contingencies
In real estate, contingencies are benchmarks buyers set that need to be met for the transaction to continue moving forward. For example, many buyers will want to include an inspection contingency in the purchase contract. This means the buyer will need time to have your home inspected. If any issues are uncovered, a buyer might ask you to make repairs before closing on the home. With an appraisal contingency, a satisfactory appraisal of your property must be conducted. If the appraisal doesn’t match the agreed-upon price of the home, you and the buyer will have to reach a new number before settlement. The caveat here is that anytime a contingency can’t be satisfied, the buyer has a chance to walk away from the purchase with his earnest money deposit in hand.
Obviously, from a seller’s point of view, the fewer chances the buyer has to exit the transaction, the better. With that in mind, it’s a good idea for you to select an offer that has the fewest contingencies from the start. Choosing an offer with minimal contingencies is just as important as the sale price. That’s why cash offers are often accepted, even at lower sales prices. Sellers see a cash offer as removing a lot of the risk of the transaction.
Opt for an ideal closing timeline
Finally, consider your optimal timeline for heading to the settlement table. Moving out is a lot of work, especially if you’ve lived in the home for a while. To that end, you’re going to want to ensure that you choose an offer with a closing date that suits your needs. Timing is everything. While a quick closing is desirable to many sellers, some need more time to move. In that case, even an offer with a lower sale price may be more desirable if the timing works better for them.