Here’s why selecting the best offer isn’t as easy as glancing at the price.
If you’re a seller faced with the pleasant problem of having to sort through multiple offers on your home, there are a few considerations that will help make the decision process easier. The first consideration is, of course, price, but a close second should be the likelihood of closing. In the other words, can the buyer prove that they actually have the funds or financing to back up their offer, and are they working with a competent agent?
The strength of a given buyer’s financing is of utmost importance. Here in Augusta, we have many VA buyers, and it’s likely that an offer from one of them may very well be the best offer you receive. That said, not all VA loans and VA buyers are the same; whether you have three VA buyers bidding for your home or just one, it doesn’t matter—you’ll still need to ask yourself questions like these before proceeding: Are they working with a local lender? Is this someone who I can trust to close on the loan? Do they have a track record of successful, timely closings?
If your buyer is working with a national lender, remember that lending giant doesn’t care if your moving van is all packed up. If it’s 5 p.m. in their time zone, they’ll be out of the office, and your transaction becomes tomorrow’s problem.
For those buyers financing their purchase via conventional loan, remember that the more money they put down, the stronger their offer becomes. Of course, cash is still king, so you may opt for a cash offer that’s slightly less than the rest simply because its likelihood of closing would be highest.
Now, price isn’t the only thing that matters. You must be willing and able to look at all the other important factors of an offer, like the timeframe for closing. Would that buyer’s possession date be helpful to you, or would it be highly inconvenient? In the negotiations, could you push for a possession date that’s after the closing date? Some sellers like the assurance of seeing the proceeds from the sale hit their bank account before they move on to their next property; oftentimes, such an approach would be impractical (if not circumstantially impossible), but sellers with multiple offers to choose from are in the driver’s seat.
“You may opt for a cash offer that’s slightly lower than the rest simply because it has a higher likelihood of closing.“
Also, consider opting for the cleanest contract possible—that is, the one with the fewest contingencies. In any transaction, contingencies equal uncertainty, and if you’re taking your home off the market and tying it up in a contract, you simply can’t tolerate too many “what ifs.” What if your buyer’s home doesn’t sell? What if their lender won’t give them final approval? What if they back out during the inspection period?
I often recommend that sellers get their homes inspected prior to listing so that they can take any potential leverage away from the buyer and request a shorter due diligence period; even if you don’t repair every little foible in the home, you’re at least aware of its issues and can use that knowledge to your advantage when negotiating repairs. In our area, the due diligence period is usually about 10 to 14 days, depending on the availability of the inspectors. The shorter the period, the better, as you’ll be able to close that much sooner.
Lastly, pay attention to the amount of earnest money a buyer is depositing. Some agents feel like earnest money isn’t all that important, but it’s indisputable that buyers who put up more earnest money have more skin in the game and are therefore more likely to close.
So, there you have it: Financing, contract terms (e.g., possession date), “cleanliness” of the offer, and earnest money—four simple items that make a world of difference for a seller who’s wading through multiple offers. If you have further questions regarding any of the four, or want more information on another real estate topic, please give me a call or send an email. I’m always here to be a resource for you!