Here are the factors to look at when gauging an offer’s strength.
To choose the best offer in a multiple-offer situation, here are the five factors you must consider:
1. The net price. Though this is obviously what you want to look at first, the highest-priced offer isn’t always the best. Someone may write a high offer, but there could also be little chance that the appraisal matches their price. Or, their high-priced offer could provide little in terms of closing help.
2. The pre-approval. Make sure your agent calls the buyer’s lender and asks them what they did for their pre-approval. There are many lenders out there who simply pull a person’s credit and ask them how much money they make before giving them the go-ahead to buy. The problem is, that’s not a pre-approval; that’s a pre-qualification. During a pre-approval, the lender will verify the buyer’s credit, pay stubs, and how much cash they have to close. They’ll also ask whether or not they need closing help. If you then ask the lender whether or not the buyer needs closing help, they’ll give you your answer. If they do need closing help, you can leverage that in your counteroffer.
3. Inspections. What are the time frames for their inspections? What kind of inspections do they want? What are they asking for after the inspections? Buyers are paying top dollar for houses right now, but we still see some of them use inspection reports to renegotiate entire contracts. In this scenario, they’ll provide a laundry list of items they want you to repair (which can cost you upwards of $10,000) under the pretext of paying top dollar for the home. You want a buyer who’s either waived their inspections or agreed to do them for informational purposes only. Keep in mind, though, that “informational purposes only” applies to home inspections. If an issue comes up in a well or septic inspection, you may be required by the lender to repair it.
You want a buyer who’s either waived their inspections or agreed to do them for informational purposes only.
4. The closing date. Does the buyer’s closing date work for you? If you’re building a new construction home to move into, will they agree to rent the home back to you until construction is complete? Or, if you’re moving because of a job relocation, will they extend the closing so that it aligns with your schedule? Find a closing date that’s compatible with your wishes, or make sure the buyer is willing to negotiate over this point.
5. The earnest money deposit. Sales contracts in the state of Maryland are written in such a way that you’ll probably never get the buyer’s earnest money deposit. There are a lot of clauses and contingencies in place so that they can almost always walk away from the deal and still keep their deposit. This is why it’s not unusual to see earnest money deposits as high as $1,000 for a $400,000 house. However, you still want to see if your buyer puts up a big enough deposit to demonstrate that they’re serious—perhaps something over $1,000. When I work with buyers, I always recommend writing an earnest money deposit that’s equal to how much cash they’ll have to bring to closing. They’ll have to write that check anyways, so they might as well write it when they craft their offer.
If you work with my team, we’ll go over each of these factors in detail to make sure you pick the best offer and maximize your sale. If you have questions about this or any real estate topic, don’t hesitate to reach out to me. I’d love to hear from you.