How to choose the best offer in a bidding war on my house?
As a seller, you may be lucky enough to receive multiple offers on your home. While this may seem like a dream come true, it can also be difficult to choose the best offer from the prospective buyers when you’re in a bidding war. Here are some factors to consider when choosing between multiple offers when selling your home.
Know what your priorities are when selling your home before any offers come in.
What’s important to one seller, may not be important to another seller. Before listing your house, it is best to consider what’s important based on your situation and discuss these details with your real estate agent. Ask yourself the following questions.
- Why am I selling my home?
- What is my preferred time frame for selling?
- Am I looking for a quick sale or the highest offer possible?
- What do I need to net from the sale of my home?
Answering these questions honestly will help you understand what to look for if you receive multiple offers.
Highest Offers is Not Necessarily The Best Offer
Remember that the best offer is the one that meets your individual needs as the seller. It’s important to remember that the highest offer isn’t always the best offer.
Here are five factors to consider.
- Earnest money deposit: How much earnest money has the buyer put down? A higher amount of earnest money may indicate that the buyer is more serious about purchasing your home.
- Cash is king: An all-cash offer usually means a quicker and smoother transaction with fewer conditions. However, be sure to request proof of funds to ensure the buyer has the funds available to cover the cost.
- The type of loan: Some loans are easier to obtain than others. For example, an FHA loan requires a lower down payment but has stricter guidelines than a conventional loan. In addition, is there a strong mortgage pre-approval letter provided with the offer?
- The down payment: A bigger down payment may be an indication of the buyer’s financial strength.
- The contingency clauses: Review any contingencies that are included in the offer. Ideally, it would be in the Sellers best interest to select an offer that has fewer contingencies. Here is a list of common contingencies to be on the lookout for.
- Appraisal contingency: If the appraised value of a property is lower than the agreed contract price the buyer can back out of the contract. It’s important to look for verbiage in the Special Stipulation portion of the agreement for any additional verbiage regarding the Appraisal.
- Home Inspection contingency: This allows the buyer to have a professional inspector come and inspect the property before closing. If any major repairs are needed, they may ask for repairs to be completed or a credit at closing. If the buyer feels the terms are not satisfactory, they can cancel the contract.
- Financing contingencies: A financing contingency gives the buyer a way out of the contract if they are unable to secure financing.
- Sale of home contingency: In today’s competitive market, these have become less common however may be included in an offer if the buyer needs to sell their current home to purchase yours.
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Consider the Closing Date?
Another important factor to consider when reviewing multiple offers is the closing date. This will give you an idea of how quickly the buyer can close on the property. If you’re in a hurry to sell, then you’ll want to choose the offer with the shortest closing time. On the other hand, if you’re not in a hurry to sell, then you may want to choose the offer with the longest closing time.
Is there an Appraisal Gap?
A buyer may offer over the asking price to win the bidding war but fail to address the potential appraisal gap. An appraisal gap is a difference between the appraised value of a home and the sale price. The buyer’s mortgage lender will only lend up to the appraised value. If there is an appraisal gap the difference must be addressed. Will the buyer pay the difference or are they expecting the seller to reduce the price to cover the difference. It’s important to understand the expectation before accepting the offer.
Is there an escalation clause?
An escalation clause is a tool that some buyer agents use to make their buyer’s offers more attractive. It’s an agreement between the buyer and seller that says the buyer will outbid any other offers by a specified dollar amount or percentage. For example, if another offer comes in at $500,000 and the original offer had an escalation clause of $2000 over the next highest offer, then the new offer would be $502,000.
If you’re considering an offer with an escalation clause, make sure to understand how it works and what your maximum sale price would be. You don’t want to get into a situation where you’ve agreed to sell your home for more than it’s worth.
You should also be aware that some buyers may try to use an escalation clause as a way to low-ball you. They may make an initial offer that is well below your asking price to escalate the price to a more reasonable level. If you’re not comfortable with this type of negotiation, then you should reject any offers that include an escalation clause.
Do you need a buyer with a flexible timeframe?
One of the questions to ask yourself was: “what is my preferred timeline? This could be extremely important when you are selling your home to purchase a New Construction property. A buyer with a willing and flexible timeframe would be crucial to the success of the transaction. To avoid having to move out of the property prematurely, the right buyer may allow you to remain in the home after closing until you close on your new home. The buyer’s real estate agent may offer this information when putting in the offer.
How can your Real Estate Agent help you?
Your real estate agent can help you review the offers and advise you on which one is the best. They will also be able to provide insight on how to negotiate with the buyers to get the best possible price for your home.
If you’re considering multiple offers on your home, make sure to consider all of the factors listed above before making a decision. With a little bit of careful consideration, you’re sure to find the best offer for your situation.
When selling your home, you may be faced with the difficult task of choosing the best offer from a bidding war. There are a few key factors that you should consider when reviewing multiple offers, including the contingencies included in the offer, the closing date, the appraisal gap, and whether or not there is an escalation clause. You should also consider whether or not the buyer is willing to be flexible with their timeframe. Your real estate agent can help you review the offers and provide insight on how to negotiate with the buyers to get the best possible price for your home. With a little bit of careful consideration, you’re sure to find the best offer for your situation.
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Thank you for reading! I hope this was helpful.