Nov. 16, 2020
You’ve finally done it. You put your house up for sale and now the offers are starting to come in. How do you go about picking the best one to make sure you don't let a good deal slip right through your fingers?
If price were the only factor to a home offer, most sellers would have it made. It would be easy if homebuyers simply pay the asking price or above on the home they end up purchasing. However, deciding on the right offer is much more complex than saying yes to the highest bidder. You have to hedge against various risks, like a buyer backed by shaky financing, or unfavorable fine print in the contract. In the event that you generate multiple offers (a seller’s dream!) there’s a whole strategy that goes into reviewing the bids and using that upper hand to lock in your desired price and terms.
So, without further ado, let’s go through what you should consider when fielding offers on your home—and how to find (and secure) “the one.”
Talk to Your Agent About Your Priorities
Before you list your house, it’s a good idea to make a list of your priorities upfront with your real estate agent, which will help you determine the right offer depending on the factors that are most important to you and your individual situation.
For example, if you need to sell because of a family or job change, speed could be a top priority. As a result, an immediate offer could be your best bet so that you can negotiate a closing date that aligns with your timeline.
Another factor that impacts the weight you place on one offer over another is maximizing your financial potential and minimizing hardship. For instance, if you receive an offer from a buyer who isn’t requesting repairs, or seller concessions you might prioritize that buyer over another. Your agent can help you understand all of the financial implications of your bottom line based on the offers that are coming in.
Review the Contingencies in Each Offer
When you’re deciding on the best offer for your house, take a close look at the contingencies that the buyers penciled in. The contingencies are opportunities for buyers to back out of the process if their expectations aren’t met. You can think of them as a buyer’s conditions before they’ll agree to a deal—so don’t overlook them, as they could potentially “kill” an otherwise great offer, price-wise.
The most common contingencies include the home inspection, buyer financing, and property appraisal—which all protect a buyer in the event they’d like to back out before the home inspection contingency expires, or the home doesn’t appraise at the agreed-upon price.
Some contingencies, however, are riskier for sellers, so look out for buyers who bring an offer forward that is contingent upon selling their existing home. You have no way of guaranteeing when and if the buyer’s home will sell, which puts you in a sticky predicament if you need to move quickly.
At the end of the day, contingencies aren’t black-and-white. In fact, they could have strings attached that may not work for you. For example, buyers could drag out a home inspection period, which could be riskier to you because the buyer has more time to inspect the property and discover issues that could implicate the value of your home—and the chances you’ll sell it in a timely manner.
Don’t Rule Out the First Offer that Comes Along
Determining whether the first offer will be your best offer can be tricky, especially in a hot and competitive market. Should you give it some time to see what the market holds, or pounce on a good opportunity?
Thankfully, there are resources—including experienced agents—that can help you gauge the chances that your first offer will be your best.
It may be the case that you receive an offer (or multiple offers) on your house within days or even hours of listing it. In fact, if you price your house right from the start, you’re based in a prime location, your house is in a great showing condition, and the market is favoring sellers, there’s a strong chance that offers will roll in right away.
If that happens (and lucky you!), don’t be tempted to wait around for something better, simply for the sake of testing the market to see what you can get. You should weigh every offer seriously, and the ones that come in early may have very motivated buyers behind them who are ready to go.
Recognize the Value of a Cash Offer but Verify Funds first
Among the offers you receive on your house, you could find that some buyers don’t require financing and are able to pay entirely in cash. Should you accept one of these cash offers, you won’t have to worry about a buyer’s approval for a mortgage loan falling through, and that gives you a higher level of certainty that the transaction will close. However, you should verify proof of funds before proceeding with any cash offers.
If a no-fuss, certain transaction is what you need (without the hassles of stagings and showings) you could also consider fielding offers from various cash investors.
Between fix-and-flippers, buy-and-hold rental investors, and the new-age iBuyers that target homes of a certain price point, the direct-buy market is more competitive than ever and you should theoretically be able to fetch more for your house if you take the opportunity to compare offers.
Leverage a Bidding War to Get the Price and Terms You Want
A bidding war is a situation in which a house generates multiple competing offers, signaling that it’s sought-after because it’s a new property, the price is right, or it has some special feature associated with it.
A bidding war is almost always good for a seller, but it can be great if you have an agent who knows how to negotiate with interested buyers to get you the best deal.
It’s important that all interested parties are given a deadline because otherwise, negotiations can be ongoing—which may not work for a seller who needs to move quickly.
Your needs, your neighborhood, and the market may not always align in your favor—and a seller’s expectations for how many offers they’ll get and the quality of those offers could take an emotional and financial hit.
That’s why hiring a reputable and experienced agent is one of the best things you can do for your sanity and pocketbook.
Experienced agents have worked with many scenarios and circumstances, so whatever your reason for selling and your needs for the future, you can trust that your agent has your best interests at heart. You can rest assured your agent won’t let the best offer slip away or settle for a deal you’re not happy with.