The current seller’s market has made multiple offer situations rather common. It may seem like this is great for sellers, but there are many things to consider to get the best possible outcome – a quick, smooth closing for a great price. Read more…
Colorado Springs, CO July, 2018
Notice I didn’t say the “best price”. That is because price is only one of the factors that makes up the BEST OFFER. Here are some of the many things that your Realtor or agent can help you evaluate to make the best choice.
Price: Of course, you are looking for the highest possible price, but keep in mind that the property also has to appraise if there is a loan involved. A cash offer that waives an appraisal provision, will allow you to get past this issue. That might make a cash offer your best option (even if it wasn’t the highest offer). If you are considering an offer that exceeds what you think the property will appraise for, the buyer may be willing to pay the difference in cash to closing should the appraisal comes in lower than the purchase price. If a buyer is willing to pay more than the appraised value, you need to make sure that they are qualified by their lender to do so. The highest price is only the best price if all the rest of the terms are acceptable.
Seller Concessions: Consider what each buyer is asking you to pay for any additional costs such as home warranties, closing costs, prepaids or any other expense.
Net Sale Price: The price that you should be comparing is the net sale price which is the purchase price less any seller concessions in the contract.
Type of Loan or Cash: A cash offer will almost always be the quickest, smoothest transaction because there are no lending conditions to meet. This allows the process to close quicker with less complications. That does not mean that a cash offer is guaranteed to close. Other types of lending have specific requirements that can affect the sale. That can involve the physical condition of the property or other requirements for the buyer. Each loan type has its pros and cons that should be discussed with your agent.
Earnest Money: This is the initial good faith deposit that the buyer makes towards the transaction. This is generally held by the listing broker or the title company until closing and then applied to the buyer’s funds required at closing. A larger earnest money deposit shows commitment but does not necessarily affect the strength of the offer.
Down Payment: The amount of down payment is an important factor to consider. It shows the financial strength of the buyer to obtain their financing and close the transaction.
Prequalification or Proof of Funds: It is critical to obtain at least a pre-qualification letter from the buyer’s lender. A pre-approval letter is preferred since it shows that the buyer has gotten further along in the lending process. If this is a cash transaction the buyer should provide proof of the funds to close the transaction prior to accepting their offer. Your agent should confirm verbally with the lenders that there are no additional conditions other than what is noted on the lender’s letter. Sometimes the lending might be contingent on the sale of another property that has not been mentioned in the lender’s letter or in the buyer’s offer.
Lender Type: Working with a local direct lender makes the transaction much smoother then working with an internet-based lender or an out-of-state lender that might not understand the process requirements for our area. Consider the different lenders as an important factor in making your decision.
Deadlines: Make sure that all of the dates and deadlines are sequenced correctly and as tight as possible so there is less time for the transaction to fall apart. Yes, transactions fall apart all the time for many different reasons. If it’s going to fall apart, you want to be off the market for the shortest possible time.
Contingencies: There are different types of contingencies that are already built into the contract and others that the buyer may have added. The most common contingency would be the sale of another property. If you consider accepting this type of contingency, be sure that you have read the contingent contract and know the status of that transaction. Also, be sure that transaction is not contingent on another sale. That would create what is known as a domino effect. If one falls apart, they may all fall apart.
Inclusions and Exclusions: Be sure that you are comfortable with leaving the items that are included and removing the items that are excluded. For example, if you have a playset that has been excluded, that means you need to remove it from the property prior to closing.
Additional Provisions: All kinds of interesting provisions can show up in this area of a contract and should be evaluated carefully. Your agent can draft a counter proposal to adjust any of the terms that are not acceptable and present to a buyer for their consideration.
Closing and Possession: Are these dates going to work with your timeline? Do you need to push these out? Do you need to make these sooner?
Rent Back: This can be a critical factor in deciding which offer to accept. If you want your home sold quickly but you aren’t prepared to move right away, negotiating a rent back from the buyers could determine which offer will be the best. A highly motivated buyer might let you rent back without any payment. Moving out prior to closing can be risky. Negotiating even a four or five day rent back after closing can give you peace of mind.
Back Up Offers: Once you’ve accepted the offer of your choice, you may want to put the second best offer in a back-up position in case something happens to cause the first offer to terminate.
There are obviously many complexities involved in determining the best offer, structuring the best terms and negotiating acceptance between the parties. Hiring an experienced, competent agent that you can trust to represent your best interests in the process is the most critical part of the process. With 20 years of extensive real estate experience and well over 7,000 closed transactions behind me, I serve the best interests of my clients before, during and after the transaction. Please contact me if you are considering buying or selling for exceptional representation in your best interest. I am here to answer your questions anytime.
Vicki Westapher – Broker RE/MAX Properties, Inc. 719-440-0514 call or text firstname.lastname@example.org