How Sellers Should Handle Multiple Offers – Best Real Estate Advice For Buyers And Sellers
You decided to put your house on the market at the best time, on the strongest sellers’ market imaginable. So, you are the boss, and you are in charge. Imagine that after just a few days on the market you have received multiple offers: 3, 5, 9? Everything is possible these days! Let’s assume that several people offered almost identical prices. Now you need to decide which offer is the strongest.
This subject is important for both sellers and buyers. If you are a buyer looking for a house this video is also for you. Understanding the sellers’ expectations and the criteria they apply; will help you write a winning offer and buy the best home for yourself and your family.
Let’s start with looking at the price. Price – is the most obvious factor of the winning offer. It’s right there, at the top of the first page of the Purchase Contract. It’s obvious: the higher the price, the better the offer, but price is not the only criteria. So, make sure you spend your time reading and understanding all other terms of the contract to get the whole picture and choose the right buyers, buyers who are truly committed and from whom you will never hear again after the close of escrow, unless of course they want to ask how operate appliances or the sprinkler system.
The first step is to assess the buyers’ financial strengths. Let’s start with looking at how much money the buyers are putting down and what the Loan to Value ratio is. If you compare two similar offers, the bigger down payment speaks about stronger financials, 50% down payment vs. 20% down payment - 50% is a stronger offer.
Keep in mind that getting a loan may be just a money management decision. Sometimes we see buyers capable of buying your home for cash but still applying for a loan.
Now let’s review some other important terms in the Purchase Contract. Let’s talk about contingencies. What is a contingency? Any contingency in the Purchase Contract is a request from the buyers to get additional time to decide if they are going to complete the purchase of your house. For example, Property Condition contingency may be requested if buyers need to run additional inspections or get estimates about some future projects. When buyers request Financial Contingency, it means that their lender requesting time to do the appraisal and approve their loan.
It is possible that just in a few days after you accepted an offer with contingencies and took your house off the market, the buyers changed their mind and canceled the contract. Now you need to put the house back on the market. And this might be harmful to your sale – there always will be questions and doubts about what went wrong the first time? Why these buyers decided to walk away?
When many buyers compete for the same house, there is a chance that you will be getting non-contingent offers. On one hand, it sounds really appealing, on another hand, you need to make sure that the buyers themselves fully understand the consequences of their decision to waive contingencies and fully commit to the purchase and their decision to buy without contingencies will not come back haunting you, and them.
Close of Escrow is another important term in the contract. It defines how quickly you will get the money from the sale. Buyers perfectly understand, that the sooner they can deliver money to the seller, the better standing their offer will have. If competing buyers take loan for the house, then the Close of Escrow dates are defined by abilities of their corresponding lenders to produce loans and deliver money to you. So you, as a seller, may want to look how reliable these lenders are.
Next: verification of buyer financials with their mortgage broker. When we work with the sellers, we talk directly to the mortgage brokers who issued buyers’ preapproval letters. They have a whole picture of buyer’s financials and will provide a professional evaluation of buyers’ financial abilities. These conversations give one more perspective into the purchasing power of the buyers and will help you decide which offer is stronger.
Don’t be one of those sellers with a perception that today’s buyers are unreasonably rich and don't care how much money they spend on your house. The truth is, people do count money and they do care how much money they spend.
Look for the motivated buyers. Motivated people will resolve problems, find answers to their own questions and get things done. Buyers and sellers are partners in the house selling transactions, and truly motivated buyers make best partners.