How Are You Handling A Multiple Offer Situation?
I don’t know if you’ve heard this before, but the highest offer may not be the best. Here are 10 Crucial things you must evaluate before selecting the winning offer.
So, you have a lot of offers, all claiming to be the best. Regardless of the number of buyers who have made offers, pick the 5 Best. The price is essential, but keep in mind the following terms and conditions as well:
#1 Financing Offers: You want to get a pre-approval letter, or better yet, a conditional loan approval letter. It will eliminate the concern of whether the buyer qualifies to get the loan or not.
#2 Cash Offers: You want to see the most recent bank statement or Proof of Funds letter (30 days or newer). The funds must be in the US so that the buyer does not have obstacles when transferring the funds from another country since it could delay the closing.
#3 The Offer Price: Consider this when evaluating the offer price. Is the buyer asking for seller credits like closing fees or repair credit? Is the buyer asking you to include a home warranty with the purchase? Is the buyer asking for furniture? Is the buyer asking you to pay for a termite inspection? These things change your earnings, so you’ll want to know how much that credit will affect your profit.
All my clients receive a breakdown of fees, mortgage payoff, and credits given to the buyer. Although this is an estimate, it gives my clients a good idea of their earnings.
#4 Offers Above Asking Price: If the buyer is financing, ask for a bank statement to see if the buyer has enough funds to cover the difference if the home does not appraise.
What I do for my clients is write a commitment addendum that if the property appraised below-offer price, the buyer would pay the difference.
Because if it’s not in writing, it never happened!
#5 The Deposit AKA Escrow: What you want to know is: How soon is the buyer sending the deposit to the title company? How much is the buyer putting as a deposit? Is this deposit refundable or non-refundable? It is crucial because you can measure the buyer’s seriousness and commitment.
In some cases, strong buyers may not have the cash on hand to make a large deposit; this does not mean that they cannot close. It just means that they do not have liquid assets.
#6 The Inspection period: This is the number of days the buyer has to inspect and decide if they want to go ahead with the purchase or not. You want to know who can decide faster. In a hot market like Kissimmee’s, you may not want to give the buyer weeks to inspect the home, especially if you are buying a home.
Remember, home inspectors may be very busy during peak season, and a brief inspection period may not be realistic. Ask if the buyer has an inspector already lined up to do the inspection.
#7 Loan Approval: In the current market, loan approval is a normal condition when financing. If the buyer has conditional loan approval, they are ahead of their game, and it would be a smooth transaction so long as all the conditions in the offer are complete. Now, loan pre-approvals are great too! The main difference between a pre-approval and conditional loan approval is that the underwriter (the person in charge of approving the loan) has reviewed the file and has approved the loan with conditions (these conditions may include the appraisal and getting home insurance).
#8 Appraisal Contingency: You may get a buyer saying: “I want this home, and I will waive the appraisal contingency. That’s how much I want it!” Well, it’s not their decision entirely. The lender has to decide whether or not the appraisal condition will be a factor in the loan approval or not.
If the buyer wants the home regardless of the appraisal value but can’t waive the appraisal contingency, have your realtor write a commitment addendum that the buyer will pay the difference if the property appraises for X amount below the offered price.
#9 Contingency to sell before buying: Well, you may be on the same boat. If you are open to this kind of offer, ask the following questions: Is the buyer’s home already under contract? Is it a cash or financing offer? How soon will that buyer get their loan approval or conditional approval if financing? When is the closing? And is that buyer also selling a home?
Sometimes, easy is better.
#10 The Closing: How soon can the buyers close? How soon do you need to close on your property?
If the closing is less than 30 days, some rush fees might be involved. Who is paying for them? If you have time, but the buyer needs to close quickly, should the buyer pay the rush fees? Can the rush fees be waived? Have these questions answered before you commit to the offer?
I ask these questions before presenting the offer and advocate for my client to avoid extra fees.
If your property is in central Florida, I will be able to help. Let’s talk 321.697.2426