Questions From a Seller: What Makes a Good Offer?
Once you’ve decided “it’s time to sell my home” and done all of the work to put your home on the market — the cleaning, decluttering, staging, photography, and much more, it’s the moment you’ve been waiting for: selling it and having offers roll in! But, how do you know what makes a good offer? First of all, you should have a seasoned, local expert with deep experience in multiple offer scenarios navigating the offers.
The one with the highest price is not always the best offer--nor the one most likely to get to closing.
There are several factors at play that constitute a good offer.
It's the first thing we talk about and the number we all jump straight to. If all other things are equal the offer with the highest price is best. But it's very rare for all other things to be equal!
Earnest Money Deposit
All offers include earnest money deposits, so the buyer can show you they are serious about purchasing your home. Once the buyer meets the contract terms and follows through with the sale, the earnest money is considered "at risk" and is the security the seller has that the buyer will perform.
Earnest money deposits are usually between one and three percent of the sale price of the home. But, in Evergreen and Conifer it isn't an exact science and regardless of what the seller requests in the MLS buyers can put as much money as they want as the earnest deposit. The more money, the more serious they are about purchasing your home--especially if the contingencies are tightened up .
Not Too Many Contingencies
The Colorado contract has many contingencies built into the standard form that the Real Estate Commission has approved. Contingencies benefit the buyer because they create opportunities to object and/or terminate for various conditions that can arise.
Sellers can be wary of contracts containing an excessive amount of contingencies because each gives the buyer the chance to abandon the sale. The best offers, in my opinion are those with the fewest subjective discretion contingencies.
An All-Cash Buyer
When a buyer is offering to pay in all cash, you don’t need to worry about them getting approved for a loan, making them a lot less risky and a stronger buyer.
A 20-Percent Down Payment
A low-risk borrower is someone who is well-qualified and puts down at least 20 percent of their home’s purchase price in cash. These buyers are also a lower risk to you as the seller. The 20% threshold removes the requirement of Private Mortgage Insurance
It’s up to you to decide how you want to weigh these factors into your decision. For example, suppose you had a pre-approved buyer offering to put down 15 percent in cash. In that case, you may favor another buyer who’s willing to put down 20 percent unless the 15 percent buyer is offering to pay significantly more for the house.
The closing date is the last piece of the offer you’ll have to consider. The closing date should accommodate both parties’ timelines. Of course, the closing date is the pay day. I always hope for the fastest closing possible because the closing represents the end of the risk to a seller that the buyer doesn't perform. But in a strong sellers market like we have in Evergreen I frequently negotiate long post closing occupancy for my seller clients. This was we have a fast closing, the seller gets their proceeds and can move forward with a strong offer on their next home without the anxiety of needing to pack up and leave quickly and/or without a replacement home.
Don’t Decide Alone
You don’t have to fend for yourself, agonizing over whether you should accept an offer or not or which offer to choose. I do this all day everyday in Evergreen and Conifer. When you work with me, you are partnering with an expert who knows theFoothills market and the closing process like the back of my hand. I know what was included in offers on houses similar to yours and can help you analyze offers to choose the one that will benefit you the most.
Have Other Questions?
Bob is starting a new series answering your questions about selling. He'd love to help you! If you have any questions, please let us know by scheduling a call below.