“Multiple offer situation” — three words that all sellers love to hear. If you live in a hot real estate market, and you’re selling your home, you might find yourself on the receiving end of more than one offer.
Although it might seem like a no-brainer to opt for the highest-priced offer, this isn’t always the best idea. When faced with more than one offer, it’s crucial that you evaluate each one carefully. Here’s how to choose the best offer when you are approached with a multiple offer situation:
Price Isn’t Everything.
Naturally, the offer with the highest price will grab your attention first. This is especially true if it’s close to (or over!) your asking price. However, in the real estate world, the highest bidder isn’t always the best buyer. For instance, if the buyer is financing a large portion of their offer and putting little cash down, there’s a chance that they may be overstretching themselves. This could prove problematic with the underwriters and delay their loan.
Consider the Buyer’s Funding
When it comes to multiple offer situations, cash buyers are key. If a buyer can pay in cash, you won’t have to worry about a lender approving their home loan. This can make the sales process much quicker and smoother. However, if the potential buyer is using a mortgage to purchase, it’s important to find out if they’re preapproved already. A preapproved buyer has already initiated the loan process, typically making their offer stronger. In contrast, a buyer who isn’t preapproved could run into issues with their financing.
A contingency is a type of clause often used in an offer to purchase real estate. Put simply; a home sale contingency is a condition that must be met for the sale to move forward. Buyers will frequently include contingencies in their offer, which, if not met, enable them to cancel the sale with consequence. These contingencies can include things such as being approved for a mortgage, the home passing an inspection, or the home meeting a certain appraisal value.
When considering multiple offers, it’s crucial to consider contingencies. Contracts that have fewer contingencies are more straightforward and less likely to fall apart. This is because there are fewer hurdles to get over and less chance for the buyer to back out of the sale.
Think About Your Home’s Value
An offer over the asking price may sound amazing; however, if the buyer is financing their purchase, you may have a problem. Accepting an offer over the asking price can create an issue when it comes to the appraisal. This is because the buyers lender will only give a mortgage for the appraised value of the home. If the appraised value is less than the agreed sales price, your deal could fall apart.
Review closing periods
If you need to move fast, you’re likely to prioritize a buyer who can close quickly, rather than one who needs longer to complete the deal. If two offers are very similar, but one buyer can close faster, it probably makes more sense to choose that offer. On the other hand, if you need time to get your affairs in order before you move, you might find a longer closing period more attractive.
Review Buyer Incentives
In a competitive market, some buyers may offer additional perks, such as paying your closing costs. With the seller’s closing costs often running into tens of thousands of dollars, this can be an attractive incentive. Alternatively, in a multiple offer situation, some buyers add an escalation clause to their offer. An escalation cause offers to outbid other buyers by a specified amount. If you’re reviewing several offers with similar price and contingency terms, buyer incentives like these can tip the scale.
Receiving multiple offers when you sell your home is exciting, but it’s crucial to consider all parts of the offer. Above is the best way on how to choose the best offer in a multiple offer situation.