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Selling your house can be an exciting time, but it can also be stressful. If your home is on the market for a longer time, you may want to take the first offer that comes in. Some people may want to take the offer that boasts the most money, but there are other variables to consider.
Sellers should consider several things when considering an offer on their property. Look at the amount of money you will walk away with, the buyer’s pre-approval status, and the time frame of the sale. When selling, you should also take into account any contingencies of the sale, the buyer’s earnest money deposit, and the type of mortgage.
Things Sellers Should Consider In a Real Estate Offer
Before you accept an offer on your property, here are some things you should consider.
1. How Much Money Will You Walk Away With?
Sometimes buyers request certain things that will reduce the net proceeds or the amount of money the seller gets. For this reason, you should read the fine print before you agree to a selling price. You may encounter closing costs, repair costs after the home inspection, and repair costs after the appraisal.
2. Is the Buyer Pre-Qualified or Pre-Approved for a Home Loan?
Being pre-approved or pre–qualified for a home loan may sound the same, but they are not. A pre-qualified buyer can get to the closing and then be rejected for the home loan.
Pre-qualified for a home loan means the buyer will most likely get the loan, though it is not guaranteed. When a buyer gets pre-qualified, they receive an estimate of what they may be able to borrow. This number is based on information provided by the buyer about their finances and a credit check.
Pre-approved for a home loan is much more involved than pre-qualified. Pre-approved home buyers have completed a mortgage application, and the lender of the loan has verified the information provided. When a buyer is pre-approved, they have had a credit check and received a pre-approval letter, valid for 90 days.
3. What Is the Time Frame of the Sale?
As the seller, you might want to close as quickly as possible. All-cash buyers who can close immediately usually have the most attractive offer. This is because they don’t have to wait on the bank to approve a loan.
If you are building a house and don’t know when it will be ready, you may not want a quick closing time. A buyer who doesn’t want to close for a month or two will be more appealing.
4. What are the Contingencies of the Sale?
Contingencies are specific benchmarks determined by the buyer that needs to happen before they move forward with purchasing the home. Contingencies create a risk for the seller because the buyer can back out from buying the house. There are several types of contingencies a buyer can set.
If a buyer sets an inspection contingency, the buyer needs time for the home inspection. If any issues arise with the house, the buyer can ask the seller to make repairs before purchasing the home. The buyer can also ask the seller to reduce the selling price in exchange for making repairs.
Appraisal contingencies are another possibility. The appraisal should match the price of the home. If it doesn’t, the buyer and seller must agree to a new price before the closing.
5. How Much Is the Buyer’s Earnest Money Deposit?
An earnest money deposit is what the buyer puts down to ensure they perform under the conditions of the contract. The listing agent typically holds this money in an escrow account until closing. If the buyer doesn’t follow the requirements in the agreement, the money goes to the seller.
The more money held in the escrow account, the less likely the buyer will want to walk away from it. In some places, the typical escrow deposit is 5% of the home’s sale price. If one buyer has a 5% deposit, but another buyer has 2%, a 5% deposit will be more attractive.
6. What Type of Loan is the Buyer Getting?
There are different types of mortgages, and each comes with its own potential issues. Some mortgages don’t require a high credit score, while others require high credit scores. Some mortgages don’t need a down payment on the house, while other loans require a certain amount for a down payment.
As a seller, you don’t want to rule out a buyer because of their home loan. However, you should know what to expect from each loan. Buyers with bigger down payments are more likely to go through with the purchase than those without down payments.
Some buyers prefer to put a small percentage of money down when interest rates are low. This is because they want to invest their money in other places where it will gain more interest. Because of this scenario, the seller should always look at the full financial picture of the buyer.
Summing It Up
Before choosing the first or the highest offer, consider the six essentials discussed above. As the seller, how much money are you walking away with, and what is the buyer’s pre-approval status? The sale time frame, the buyer’s earnest money deposit, and the type of mortgage are important to consider.
What may seem to be an appealing offer at first could come with more contingencies than expected. Will you have to put money into making repairs if the buyer is not pleased with the inspection? Does your home appraise for what the buyer is buying it for?
Overall, you want to educate yourself on selling your home to make the best decisions. These are all things that a seller should remember before they agree to an offer
