What Should Home Sellers Look For In An Offer?
In today's red-hot real estate market, sellers should consider looking at more than just the offer price for their home. Many places across the country are very much a seller's market, and as such, sellers should be aware of other things to look for in an offer. Knowing these options can help in negotiating the sale of their home, and it can also help determine which offer is best for you in a multiple offer situation. Here are four additional offer considerations for home sellers (besides home price):
Determine Your Preferred Financing Method: Buyers can either finance the purchase of a home or pay for the home in cash. When reviewing offers, sellers should always make sure financed offers have a pre-approval letter and that cash offers have proof of funds. Cash offers offer the seller more closing flexibility, and generally is less risky because it does not require the buyer's full mortgage approval. It is important to note that cash offers can have more negotiating power than financed offers.
Larger Earnest Money Deposit: Earnest money is often referred to as a good-faith deposit. This money goes toward the buyer's down payment if they close on the home. A typical earnest money deposit is 1-2% of the purchase price. However, a larger earnest money deposit shows the buyer is a serious buyer and therefore, makes the offer stronger for the seller. Depending on the situation, if the buyer walks away and does not purchase the home, the seller can potentially keep the earnest money.
Consider Offers With Fewer Contingencies: Contingencies in real estate transactions are a set of criterion that need to be met in order for the sale of the home to move forward. Examples include an appraisal contingency and inspection contingency. From the buyers point of view, these contingencies can help uncover potential costly repairs, ensure they do not pay more than the home appraisal, and the opportunity to secure financing for the purchase. If a contingency cannot be satisfied, the buyer has the opportunity to walk away from the deal with their earnest money. From the seller's perspective, contingencies can end up netting less profit if there is a need for repairs, or having to renegotiate the sale price if the offer price is above the appraised value. As a seller, not having the contingencies eliminates some major variables of the transaction.
Closing Flexibility: Choosing an offer that meets your needs in terms of an ideal closing date can make all the difference. For example, if the buyer wants a quick close, but you need the traditional 30 days, that offer may not be best for you. Similarly, sometimes sellers need an extended closing timeline and offers that allow for that flexibility may be more attractive.
Ultimately, each individual seller will need to know what is best for them and fits their specific set of needs. Some sellers are only concerned with the offer price, while other sellers needing an extended closing timeline, for example, might value an offer with closing flexibility more than an offer with the highest sales price. Many sellers will lean toward a cash offer that is lower than a higher offer that requires financing due to not having the barrier of having to contend with the buyer's financing and cash offers can often provide closing date flexibility as well.