It’s not uncommon for investors to seek the highest price when selling a home. The bottom line is, after all, perhaps the most important thing to any business. If all other things are equal, there is no reason not to take the highest offer. The goal is to maximize your return and get your home off the market. There are, however, other very important selling factors that can’t be overlooked. Some may have a bigger impact on the sale than you realize. Here are some other things that require your attention when putting a home on the market:
1. Prequalification/Financing: Even before you look at the offer amount, you should take a look at the financing currently in place. If they are making a cash offer, did they include an updated proof of funds letter? If they are using lender financing what is included in their prequalification letter? Most prequalification letters are generic in nature, but take a look at what type of loan they may be approved for. There is a big difference in the underwriting guidelines between FHA and conventional loans.
The greater the down payment, typically the stronger the applicant is. This doesn’t always guarantee a smooth transaction, but it does improve your chances. If you and your real estate agent are still on the fence, put a call into the lender or mortgage broker. They can’t give you specific data on the borrower, but you can get a good idea of just how strong the applicant is. An offer from a stronger applicant with a greater chance of closing should be viewed more favorably than a higher offer from a weak borrower.
2. Closing Date: By skimming the offer page of the contract, you miss many of the important details for the transaction. This is where you can find out specifics of the offer that may be more important than the price. The first item you should notice is the proposed closing date. Most real estate purchases are currently taking anywhere from 30 to 45 days. Any offer that goes past 45 days must be questioned. In most cases, it is typical for there to be at least one extension from the buyer. Even with just one extension, you are now looking two months from the time the offer is accepted until you close. A lot can happen during this time. The market may change, loan programs could be gone and items may come up with the loan approval. The longer the closing date, the weaker the offer is.
3. Contingencies: If you ever watch one of the many real estate shows on TV, they stress the importance of cash deals with no contingencies. A contingency on the contract can be anything from removing certain items in the property to waiting for the inspection report. Each contingency is a roadblock to closing your deal. Some of these are common and expected, but if the buyer keeps asking for additional credits or things that are over the top the offer instantly becomes weaker. There is nothing wrong with negotiating, but you need to be careful when the offer becomes too tilted in their favor. These contingencies could require you to spend money adding or removing items that only this particular buyer is asking for. If the deal ends up not closing, you are stuck with changes that you don’t really want. If the contingencies become too much, you need to look at other offers.
4. Responsiveness: Receiving a strong offer is only important if you are able to follow up with the buyer. One of the most important aspects of any deal is communication. You can get a sense for just how badly a buyer wants the property by how quickly they communicate with you. They can have the highest offer, but if you have to wait two days for a signature or to get an answer on the contract, it could be a negative sign of things to come. If all other things are equal, or close to equal, the buyer that responds the quickest should be the one you go with. Not only for the ease of the transaction, but this is a sign for how they will proceed with their financing. There are plenty of time sensitive documents in the loan approval process. If they get your purchase items back quickly, you can bet that they will do the same for their mortgage. This increases the chances that you will hit your closing date without any problems.
It is easy to be blinded by the purchase price. Of course this is an important number, but it should not be the only thing that you look at. Any buyer can make a strong offer, but it does you no good unless the deal actually closes.