There is nothing more thrilling when selling your home than receiving a full asking price offer (or in today’s market, an above asking price offer or multiple offers). However, there is more to an offer than just the offer price. Below are a few of the most important terms to carefully analyze before entering into a contract to sell your home.
Inclusions and Exclusions
The general rule is that the purchase of your home will require to you to include anything “affixed” to your home. But is that okay with you as the seller? Do you want to take your Ring doorbell with you? What about the custom window fixtures that you already earmarked for the windows on your next home? Also, make sure the buyer has not written in anything that isn’t affixed, that you want to keep-- the Benz (or beater) in your driveway should not be part of the sale.
Deposit Amount
Are the buyers putting down a deposit large enough that shows that they are serious about purchasing your property? A practical way to answer this question is to think to yourself “would I walk away from this amount of money?” If the answer is “no” then consider the deposit sufficient.
Contingencies
Do the buyers need to sell their home or another property in order to purchase yours? Do the buyers need to receive gift funds from a third party in order to afford your home? Contingencies are not a bad thing; they are a part of real life. We can’t all afford what we want without liquidating some assets or receiving some help to get started. But as a seller, you want to understand where the risk is in an offer for your home. And you want to understand what may make one offer slightly less qualified than another. Contingencies are an increase in risk, and a decrease in quality.
Property Inspection
If you’re in a hurry to sell your home, pay attention to how many days the buyer is allowing for the property inspection to be complete. An aggressive duration is 3 days, and but anything past 7 is unnecessary. Try and keep the inspection period to around 5 days, maximum. Additionally, in this seller’s market, buyers are doing whatever it takes to get an offer accepted, including waiving the property inspection. While we would not recommend a buyer client to waive the inspection, the inspection does present risk to the seller. Will they find something materially deficient in your home? The offer that waives inspection presents slightly less risk.
Type of Financing
30 Year Conventional? FHA? VA? Cash? As a seller you want to be as certain as you can that the buyer will qualify for the financing they need to purchase your home, and as they say, “cash is king.” A cash offer with proof of funds means you won’t need to worry about whether the borrower will qualify for financing. If you aren't lucky enough to get cash offers, then generally as a seller, you will be exposed to the least amount of risk if your prospective buyer is applying for a conventional loan. For a great discussion on what makes a conventional loan less risky than an FHA or VA loan, I refer you to this article: Educate yourself on the types of financing!
Loan Commitment Duration
A seller should not give the buyers too much time to get a loan commitment from their lender. At the end of the day, we want the buyers to apply for their loan as soon as possible and we want their lender to commit to giving them the money to purchase your home. Because if the lender is not going to give the buyer the money for their purchase, they’re no longer the buyers and you will have to go back on the market.
Closing Date
Not much to report here. Just make sure your buyer’s anticipated closing date aligns with your needs.
In sum, there are lots of ways to analyze an offer, but the terms outlined above are a good start and your real estate agent should be prepared to discuss each one in turn.