Multiple Offers On a House? Here's What To Do!
Dated: December 4 2020
Let's say you are in the beginning processes of selling your home. You are priced right and it's a flourishing sellers market. Amongst all the craze, your home has been shown six times in three days! 4 Offers roll in the following day. Now what? How do you know which one to take?
To start, that's a pretty good spot to be in, congratulations! Let's talk through this. Begin by defining your goals! Is getting the most money on your sale the most important thing for you? Is flexibility in your timeline more critical? Is it more important to sell quickly? Defining these priorities will really help us evaluate which offer is going to be the best fit.
Once we've determined what your goals and your priorities are. The next thing I like to do is to categorize these offers into kind of three parts: Speed, certainty, and price.
Speed. It's especially important regarding the closing date. How fast do these buyers want to move? How does this align with your timeline? If you need to move immediately, then maybe a sooner closing is going to be a better offer for you. There are several different scenarios that would make the speed of a transaction a big priority! Maybe more flexibility in that closing date is going to offer you a better fit for accomplishing what your goals are. So that's definitely something to think about. How do those offers offer stack up according to what you need to accomplish with your timeline?
Certainty. Do you have all cash offers on the table? The majority of the time having a cash offer means less risk, which is obviously appealing! The primary benefit to an all cash offer is you usually don't have to worry about an appraisal. Sometimes if those appraisals come in low, it can throw a stick in the spokes of a transaction, so typically an all cash offer avoids that scenario. Despite an all cash offer bringing that higher degree of certainty, sometimes the trade off is a lower price! Not always, but sometimes. So that is absolutely something to take into consideration. The next thing to look at is how financially stable the buyers appear to be. Our goal of course, is a smooth escrow all the way to closing, and that is far more likely with a financially stable buyer. There is a few factors that we look at to help determine this. First, how much are they putting down for their down payment? How much is their earnest money? And if they're getting a loan, how strong is that? It is also imortant to remember that a preapproval should always be submitted with an offer, as that is usually your first hint at financial stability.
Another big hint for financial stability is down payment. A higher down payment could be indicative of a serious and more financially secure buyer. However, in our local market here, there are a couple of loan programs that are zero down. One of those is a VA loan and in my opinion, VA loans should not be discounted just because of the lack of a down payment. These loans are earned, of course, through military service and my personal feeling is they need to be evaluated with that basis sort of in mind too. So it may not have as much indicator of financial stability or instability with the VA loan because they've earned that through military service.
Here locally there is also a loan product called the USDA loan which is also a 0% down loan product. And it's specific to rural areas like ours! So not all areas have access to this loan product, and they're really used quite frequently here. So in my opinion all of these loans have kind of pros and cons and should be weighted on par with the amount of down payment.
Side Note: I really want to make the point that it is my firm opinion that a strong local lender is at least as important as the type of loan. I have seen deals fall apart where the lender was from out of town, they're not familiar with the area. They are not familiar with some of the unique things that we deal with here, making that something worthy of evaluation. Don't only ask if there's a pre-approval letter, but who is that preapproval letter from? Does that lender have a strong track record of closing the types of loans that the buyer is trying to get for your particular type of property? There can be quite a bit to unpack there but it is of great importance to understand how the loan, the down payment, the type of loan product, and how they all work together to make a stronger borrower.
What contigencies are you facing in any of the offers that you are evaluating? When a buyer submits an offer, they are stiff with contingencies meaning they are stipulating additional requirements that must be met before the sale can be finalized. All contingencies in an offer, of course, should be evaluated as to how they might impact the sale. The stability of a transaction often depends greatly on these contingencies, meaning the certainty of the deal can be at risk.
Contingencies that we see most of the time involve financing, appraisal and inspection, or due diligence contingencies. Occasionally we do see a contingency for a buyer to sell their home before they can purchase yours, adding another layer of complexity to the deal. We have seen this more frequently right now as the market is just heating up and is moving so quickly. As a seller, you might find yourself in that position too! As a buyer where you are making an offer on the home you wish to purchase, you've got to sell the home that you're currently in. Not an uncommon occurence! As you can see, there is quite a bit that goes into the certainty of a sale. Overall, make sure you completely explore and really understand the buyer's position and how that's going to impact your sale ability to move forward and accomplish your goals.
Price. How much is the buyer offering? Although price is pretty self-explanatory, there are a few additional factors we take into account becausein the end it can have an effect on your net. That being said, the highest offer in price isn't necessarily going to be the one that nets you the most! This is critical for you to understand when it comes to evaluating those offers! Is the buyer asking you to pay for some of their closing costs? It is common that a buyer will ask a seller to pay up to a certain percentage or a certain dollar amount of their closing costs! On the contrary, sometimes the buyer offers to pay some of your closing costs to make their offer a little bit stronger. Sellers can sometimes negotiate those closing costs and fees such as escrow fees, title, insurance, home, warranty, fees, HOA transfer fees, recording fees, etc. Here in our area,it is not uncommon for water to be involved in the purchase. That adds another layer of complexity to it as well as forther opportunity for negotiation..
In closing, there are many layers in an offer that need to be stripped back in order to determine which will be the best fit for you and your circumstances. Even then, the most important thing you can do is identify your main goals and what your biggest priorities are in selling your home. Analyzing the speed, certainty, and price of each offer will make all the more sense if you do.
Hopefully this answers whatever questions you had and that you have obtained a newfound confidence in yourself as you prepare to sell your home! If you have any remaining questions, I am just one phone call away! Thank you for reading, until next time!
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