What to know before accepting or rejecting an offer for your home
So you’ve gotten an offer on your home – now what?
Whether you have one or multiple offers, it can be difficult to determine what is and isn’t a good offer. While a good listing agent can help you navigate offers and negotiate with potential buyers, it is important to understand what makes a good – or a bad – offer.
More than just the price
A good offer should be at or near listing price; this shows that you priced your home correctly at its market value. Many sellers fall into the trap of being blinded by the price without looking at the other parts of the bid; this sometimes happens in multiple offer situations when the seller selects the highest offer without looking at other factors.
Five things – besides price – to consider in an offer
Every seller wants top dollar for their home. However, there are a number of other parts to a bid to consider. The following five areas should be considered when evaluating the entirety of an offer on your home.
- Earnest money. The earnest money deposit, or EMD, is a sum of cash offered by the buyer to show they are serious, or earnest, about purchasing a home. The standard EMD is 1-3% of the value of a home; a house listed at $200,000 could expect to receive between $2,000 and $6,000 in earnest money with an offer. If the buyer backs out of the sale without serious reason the seller typically keeps the EMD, meaning that offers with higher EMD’s tend to be stronger.
- Almost all offers have contingencies, or provisions that need to be met in order for the sale to go through. common contingencies include:
- Home inspection
- Sale of current home
Contingencies are almost always negotiable; the fewer contingencies on a home, the more likely it is to reach closing without delays and in a timely manner.
- Down payment. The size of the down payment can effect the strength of an offer. With a goal of reaching closing as quickly as possible, an offer with a larger down payment may indicate the financial wherewithal to easily have their mortgage approved. While the average down payment is 10%, FHA and VA loans allow buyers to put down less.
- All cash offers. An all cash offer is ideal for buyers as it eliminates the need to wait for bank approval for a mortgage or include an appraisal of the home. However, some cash offers may be for significantly less than the asking price as they eliminate many of the contingencies that can slow down the escrow process.
- Closing date. Most closings take between 30 and 60 days; buyers can request an earlier or a later closing date as part of the contingencies to their offer. Many cash offers request earlier closing dates as the need to wait on financing and mortgage approval is eliminated; likewise, later closing dates are often requested by those moving from out of the area or waiting on the sale of their own home.