Price Isn't Everything: Evaluating an Offer
Just at the point your are totally sick of making the beds and keeping the kitchen pristine, an offer comes in, and you are stoked. And as you imagine what it's going to look like, you are probably focused on the line in the contract that reads Total Sales Price.
While that's natural, price is not the most important thing that will be in that offer. Here are some other things to look for:
- What type of financing are the buyers planning to use? If they are putting down at least 20%, that’s better than if they are trying to get in with a mortgage product that might allow for a low down payment. They are out there, but lenders have very strict guidelines.
- How big is their earnest money deposit? This is a case where size matters.
- Are they financially qualified to buy your house? Have they been preapproved?
- Which lender are they using? Some are good. Others are problematic, especially when it comes to appraisals and final loan approval.
- Did they include an appraisal contingency? If so, and if the appraisal comes in low, they will have to increase their down payment or ask you to lower the price. If you don’t, they can walk.
- Where is the down payment coming from? If they are using equity from their current home, is it already under contract? If so, how strong is that contract? You will want your agent to have a look at their contract and talk to the other buyers’ lender.
- What does their offer say about what happens if the contract on their house falls apart? Can they settle anyway?
- Are they asking for a credit at settlement to help them pay their closing costs? If so, this will reduce your net, and it could have a negative impact on the appraisal.
- How long do they want for their home inspection? Anything over a week is a little excessive.
- Are there other contingencies that increase the risk that the transaction won’t work? Do they need to finalize a new job? Do they need their parents’ approval?
Keep in mind that if there are things you don't like, you can always counter the buyer's offer. And as long as they are financially viable buyers, it's better to counter than to just say no. If the would be buyers are willing, but not ready or able financially to buy your home, that's when you say no.
When your "SOLD" sign goes up, you really do want it to stay up!
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