Congratulations on selling your home! What an exciting time! But when it comes to picking a buyer, it’s important to take a step back and recognize that your bottom line shouldn’t be your only consideration. In many instances, the terms a potential buyer includes in the offer also play an important role. It can determine how many hurdles you’ll have to clear in order to reach the closing date. Every seller should carefully review an offer, beyond the dollar amount, before settling on a buyer. Here are some thoughts on other factors to consider.
Understand your preferred financing method
As a seller, you probably have an offer amount in mind that you would like the buyer to meet or exceed. If the buyer intends to get a mortgage, there should always be a pre-approval letter, or better yet, be underwritten, which should be included in an offer directly from the lender. If a potential buyer makes a cash offer, ask for proof of funds before accepting. This proof will usually come in the form of a bank or investment account statement.
Look for a larger earnest money deposit
Next, you may want to pick an offer with a sizable earnest money deposit, also known as a good-faith deposit. This is a sum of money that a buyer entrusts to the seller’s brokerage firm to prove that he is serious about purchasing the home. A deposit that’s worth 1% to 3% of the sale price is normal, but the higher the deposit, the stronger the offer. The buyer’s earnest money deposit goes toward the down payment, if they eventually close on the home. On the other hand, if the buyer breaks the contract after writing off contingencies, and walks away from buying the home, you can potentially keep the deposit.
Consider fewer contingencies
In real estate, contingencies are benchmarks buyers set that need to be met for the transaction to continue moving forward. For example, many buyers will want to include an inspection contingency in the purchase contract. This means the buyer will need time to have your home inspected. And if any issues are found, a buyer might ask you to make repairs before they will close on the home. With an appraisal contingency, a satisfactory appraisal of your property must be conducted. If the appraisal doesn’t match the agreed-upon price of the home, you and the buyer will have to reach a new number before settlement. The caveat here is that anytime a contingency can’t be satisfied, the buyer has a chance to walk away from the purchase with their earnest money deposit in hand. Obviously, from a seller’s point of view, the fewer chances the buyer has to exit the transaction, the better. With that in mind, it’s a good idea for you to select an offer that has the fewest contingencies from the start.
Opt for an ideal closing timeline
Finally, consider your optimal timeline to close. You’re going to want to ensure that you choose an offer with a closing date that suits your needs. Consider asking for a free leaseback or renting back from the new owner. It is still a strong sellers’ market!