When you’ve put your house up for sale and you’re fortunate enough to get more than one offer, you’ll need to scrutinize each contract before making a decision. Although it may seem counterintuitive, the highest offer may not be the best one for you.
There are all sorts of considerations, like the time frame in which you need or want to sell your house, the buyer’s financial positions and contingencies within each contract.
Here are some things to bear in mind when making your choice.
- Discuss your priorities in selling your home before listing
It's important that you discuss your mindset and your priorities related to the sale of your home with your selling agent before you list the home. The better your realtor understands your needs, the better he or she can work towards achieving the best result for your individual situation.
For example, if you are selling an investment property when it’s a seller’s market and you are not in a rush, your realtor would give you different advice than if you need to sell the home you’re living in quickly – perhaps due to a job relocation, death or divorce. If you need to sell in a hurry, it could be wise to accept an early offer, even if it’s not quite as high as you’d hoped, so that the closing date will align with your timeline.
Your financial situation will also impact the decision-making process of which offer to accept. For example, if a buyer who has made a lower offer is willing to take the house as it is, you may find it more beneficial to accept that offer over a higher offer where the buyer is insisting on certain repairs to be done as a condition of sale.
- Don’t turn down the first offer on your house just to test the market In a competitive market where you know that similar houses in your neighborhood are getting snapped up, you may be tempted to dismiss the first offer you get in the hope of getting a higher price. This is especially true if your house has only been on the market for a few days. However, it makes sense to seriously consider the first offer, especially under these circumstances:
- There’s a cash buyer
- You’ve found a home that you want to buy and you need your home to sell first before you can close the deal on the new house.
- When your house is unusual. Perhaps the flow is not great or there are creative additions to the house which won’t appeal to a large market. There may also be a limited number of buyers who can afford your home, if your house is in a high-end price bracket.
- When you need to sell in a hurry
- Consider the factors that set each offer apart
If you are fortunate enough to have received two or more offers on your home, you need to consider more than the price alone. Resist the pressure to make a hasty decision, even if you are in a bit of a hurry to sell.
It’s important to look at the contingencies within each contract. These are factors that will affect when and even if a sale will go through.
Imagine that you have a time frame within which to sell and you’ve received two offers – a higher offer which is contingent upon the buyer selling his existing home and a lower cash offer. It would make sense to accept the cash offer, as long as it’s a reasonable one. You have no idea how long it will take the buyer who made the higher offer to sell his home, or if he will manage to sell it at all.
Other common contingencies include the buyer securing financing, home inspections and the property appraisal.
The fewer contingencies there are in the sales contract, the less complications there are likely to be in a sale, so keep that in mind when comparing contracts.
However, you don’t have to be concerned about working out what’s best for your situation alone, as an experienced realtor will be able to explain all the ins and out of the contract and the possible implications related to each when deciding on which offer to accept.
- Don’t get emotional, treat the transaction like a business deal
Before listing your house you should speak to your realtor and find out what your home is worth, based on recent sales of similar properties, get an understanding of the current market and then work out what the lowest offer you are comfortable accepting is.
According to an recent article in US News you should, ‘Weigh the estimated home value with the amount you need to pay off your mortgage, be able to buy another property or simply feel like it was a worthy deal. Expect to receive offers below your asking price, and know how low of a price you’re willing to accept to move on with a deal. Factor in other details based on your needs, such as the closing date, and set your limits ahead of time to avoid making a decision based on emotions rather than logic.’
- Compare the earnest money deposit
The earnest money is the deposit which an escrow agent holds in an escrow account until the deal is closed. This money is meant to ensure that the buyer sticks to the conditions of the sales contract. However, if the buyer fails to do this, the seller gets to keep this money as liquidated damages.
In the event that you have two buyers offering the same amount, however, one buyer puts a escrow deposit of 5% of the sales price down and the other buyer puts 3% (which is typical) in escrow, it would make more sense to accept the offer with the higher escrow deposit. Not only would you get more money if the sale falls through, but the higher escrow deposit makes it less likely that the buyer will walk away from the deal.
- Don’t turn down an offer because you don’t like the buyers
Although you may have a lot of emotion attached to the memories built in your home, you are moving on and it’s time to let go and embrace all the possibilities that the future holds for you. You will always have the memories of the life that you’ve lived in that house and it shouldn’t be any of your concern if the new buyers want to paint the interior a vibrant fuchsia or build an accessory dwelling unit (ADU). It really doesn't matter.
It seems absurd that any owner would consider turning down an offer based on anything but the facts of the contract, however, if you think you may struggle in this area remember that the Fair Housing Act prohibits discrimination based on race, color, religion, nation of origin, sex, disability or familial status. If you reject an offer for any of those reasons, you could face a lawsuit.
Your expectation as a seller on the amount and quality of the offers you’ll receive may not be aligned with the current market, which is why it’s important to speak to a professional and reputable realtor, who understands the market.
A good sellers’ agent will have your best interests in mind and will help you navigate the sales process to help you minimize stress and get you the best result possible for your unique situation.