A Sellers Market may bring Bidding Wars!
Yes, it is frustrating for a buyer to have to compete for a home when the housing inventory is low.
However, it also makes a seller’s head spin a bit trying to make the decision as to which offer to choose. Here are my top 3 tips that I share with my client’s when they are analyzing multiple offers.
Organize key terms in a spreadsheet
This is something that I put this together for my client’s to help summarize and compare the offers. If you are presented with multiple strong offers for your property, I find it helpful to break it down into a basic spreadsheet.
Key terms to consider are:
PURCHASE PRICE
GOOD FAITH DEPOSIT AMOUNT
TYPE OF MORTGAGE
SETTLEMENT DATE
ANY CONTINGENCIES (HOME SALE CONTINGENCY, MORTGAGE CONTINGENCY, INSPECTION CONTINGENCY)
2. Consider which offer is most likely to close
What you should be most concerned with is which offer is most likely to actually close. That’s the whole point right? You want to make sure that the buyer you choose is serious, qualified, and intends to proceed in good faith toward purchasing the property.
Think about issues that could arise that could make deals fall apart.
Financial Issues - Always make sure you have a mortgage pre qualification letter, but also look at things such as the deposit amount and type of loan to help determine who is stronger and less likely to encounter issues obtaining their mortgage.
Inspections - Don’t expect someone to waive inspections (although some buyers are choosing to do this), but perhaps someone includes a clause in their offer to give reassurance that they are not looking to go crazy on inspection requests. There is obviously no guarantee because the buyer has the right to their due diligence, but it shows their state of mind and their intent to proceed in good faith.
Appraisal - A property needs to appraise at the purchase price for most offers obtaining mortgage loans. I discuss this more next!
Keep these in mind when reviewing offers and the terms presented to you.
3. Highest Price is not always the Best Offer
What?!
Yes, it’s true! Remember, most buyers are obtaining a mortgage loan. In order to be approved for that loan, the property will likely need to appraise at the purchase price.
So let’s consider a hypothetical situation:
You list your property for $350,000 and receive 4 offers all over your asking price. You decide to go with the buyer who offered $370,000 because it was the highest bid. Unfortunately, the appraiser comes back with a property value of $365,000.
Now the buyer and seller are presented with a challenging conversation where either the purchase price needs to be adjusted to the appraised value OR the buyer agrees to put more money down to make up the difference OR the buyer and seller agree to split the cost.
Most of the time, a buyer will be pretty uncomfortable paying over the appraised value for a property.
My point is… It’s important to consider all the terms and not just the price!
Questions about selling your home? Please reach out and I will be happy to discuss with you!