You’ve already found the right real estate agent, learned how to safely sell your home during COVID-19, gotten your home ready for sale, and learned tips for selling your home in a seller’s market[1] . Now, it’s time to learn how to choose the best offer on your home.
In the current seller’s market, odds are, you’ll be faced with a bidding war. This is great news! It means you should have several offers on the table to choose from. You may be inclined to pick the buyer who offers the most money for your home, but the best offer isn’t always the highest bidder — it may be the one that best accommodates your situation.
Set a deadline for offers
When you first list your home, consider allowing a couple of days for buyers to attend showings or an open house, and then set a deadline for when they must submit an offer.
By setting a deadline, buyers will feel a little pressure to submit an offer if they’re at all interested. Plus, it will allow you to review all offers at one time — comparing them to determine the best option for you.
Compare offering price and financing
The easiest way to compare offers is by looking at a buyer’s offering price. No matter how great the other conditions of the offer may be, if the dollar amount isn’t high enough, you’re likely to throw it out.
Another part of the financial strength of the offer is how the buyer plans to finance the home. Generally, a cash offer is best — although this can be rare given the large expense of a home. The more cash offered as a down payment, however, the more likely the bank will be to approve the buyer’s mortgage — and the more likely the deal is to go through.
Mortgage pre-approval also makes a buyer’s offer more attractive, as does offering more in earnest money. Earnest money is a deposit a buyer makes to show they’re serious about purchasing a home. Depending on terms, they may or may not get this money back if they back out the deal.
The offer’s price matters, but other financial aspects, such as earnest money, mortgage pre-approval, and a down payment are just as important when deciding on an offer.
Try to avoid contingencies
Contingencies are caveats a buyer may add into their offer. These may include items such as being approved by their lender, the home appraising for a certain amount, passing a home inspection, or their own home selling prior to closing.
A buyer may also request that the seller pay for a year of a home warranty service. As a general rule, the fewer contingencies, the better. More contingencies provide more ways for a buyer to back out of the deal last minute.
Pay attention to the closing date
The importance of the closing date the buyer offers may vary depending on your reason for selling. If you’re moving cross-country for a new job, you’ll likely want to tie up loose ends and have a quick closing. If you’re simply moving across town, this may not be of much concern.
Either way, the further out the closing date, the higher your holdover costs may be. This means paying for two mortgages, multiple utility bills and double the insurance unless the moving date to your new home matches perfectly with the closing date of your old home.
A buyer who offers a closing date that fits your unique needs might just be the one to win the bidding war.
Look for deal sweeteners
Sometimes buyers will add additional seller benefits in order to increase their chances of winning the bid. These may include offering to pay some or all of the closing costs the seller typically pays or not asking for any repairs after an inspection.
Be sure to factor in these offer add-ons when evaluating the overall competitiveness of a deal and consult your seller’s net sheet. This will show your overall profit from the sale after your real estate agent’s commission and all other expenses are accounted for.
Not all offers are created equal
Clearly, there are a lot of factors to evaluate when reviewing offers and choosing the best one. But don’t worry — you’ll also have an opportunity to negotiate offers and attempt to remove any contingencies or terms that give you heartache.
Selling a home in a seller’s market is the ideal situation. Now, you just have to worry about choosing the best offer for your needs, whether it’s the one with the highest price, the one with the fewest contingencies, or the one with the best closing date or add-ons.
