In one of our previous blogs, we discussed multiple offers and the primary focus was on the buyer's perspective.
Today, we will focus on the seller's perspective and what to do when you get more than one offer on your home.
In one of our previous blogs we stated that multiple offers are the ultimate goal for sellers, and this can truly be the case and it truly can be the case. That said, there is often more to think about, and additional factors that weigh on your decision making process when you are presented with multiple options. Lets dive in with a seller - agent Q & A...
What is most important to us in this transaction?
This is a fundamental question to ask yourself. For most sellers, the bottom line net proceeds in their pocket is most important. This means you may accept the offer that simply nets you the highest amount regardless of the other terms. Occasionally, sellers need as much net proceeds as possible to carry into their next home. And often, the line between selling, renting and holding is so thin that the smallest difference in net proceeds can weigh heavily on your thought process. If the net proceed is most important to you, you shouldn't ignore the other terms of the offer, but most often the highest net wins the deal because this is typically the number one priority for sellers.
Which offer reduces my risk of the deal not closing the most?
Another incredibly important question and one you should most certainly ask your agent! In multiple offers, the fewest contingencies and best terms often wins. This is because sellers place a premium on an offer they feel reduces their risk of a void contract. For example, if a seller is contemplating a cash offer with no contingencies, the seller knows there is almost zero risk of the deal not closing (provided the buyer has provided proof of funds). Even if a cash offer is slightly lower than a financed offer, the seller may accept because the lower risk has a monetary value to them.
Which offer has the best financing terms and lender?
Sellers should always be concerned about the strength of the buyers pre-approval letter and the reputation of the lender. This is true for a variety of reasons. Most importantly, you want to ensure that the loan officer has done a thorough pre-approval for the buyer. Has the lender reviewed the borrowers tax returns, pay stubs and credit report? Is the lender worried about any guidelines that could affect the borrowers ability to obtain the loan? The LFSF guys ask a series of 10 questions to every loan officer that submits a pre-approval letter on one of our listings. This ensures that we can go to our sellers with confidence that the borrower has been vetted beyond a piece of paper. Finally, whether the lender is a local reputable lender or some unknown "internet institution" is incredibly important. Agents and sellers gain peace of mind knowing that the lender is reputable and has a track record of closing deals on time. Make sure you ask your agent, "have you worked with this lender before?" In multiple offers, the difference between winning and losing can literally be the lender chosen. We always tell our buyers, "go with a local reputable lender" because in an "apples to apples" multiple offer situation, it can be the difference between winning and losing.
Does my home have inspection risk?
Sellers should be aware that they are required to fill out a Maryland property disclosure/disclaimer form as part of their seller disclosures. Therefore, any latent defects or known issues need to be disclosed to potential buyers. When we speak about "inspection risk," we are referring to things that are unknown to you as the seller such as, is my HVAC or roof nearing end of life, or what kind of wiring do I have behind my walls? These kinds of big ticket expenses can cause a buyer to get cold feet and kill a deal. Therefore, your agent should point out potential home inspection issues as they walk through your home for the first time. When considering multiple offers, you may place heavier weight on the offer that waives inspection or accepts the home in AS IS condition. Remember, accepting an offer is only the first step, and getting though the home inspection is typically a pivotal next step.
What is my ideal time-frame for moving out of my home?
Often times buyers will ask the seller, "what is your preferred settlement time-frame"? Take advantage of the leverage you have in a multiple offer situation, and pick the settlement date most conducive to your plans. Additionally, if you need funds to purchase a new home (or more time to purchase a new home), it is often beneficial to close on your current home and then "rent back" from the buyer. This means you can stay in the home for a specified time after you have obtained your net proceeds. Typically, the seller pays the buyers principal, interest, taxes and insurance during the rent back period, and a security deposit is held by the title company. Remember, rent backs can not exceed 59 days. However, this flexibility of timing can create a less stressful transaction and help you, the seller, optimize your moving plans.