NEGOTIATING OFFERS ON YOUR GREENS FARMS CONNECTICUT HOME
Getting an offer is not the end of the sales process, it's really the beginning. Up until this point everything has simply been paving the way for the right buyer to make an offer on your home. An offer includes more than the price, it includes the terms of the sale, which can sometimes be more important than the price. For example, if someone offers full list price, but makes the sale contingent upon the sale of their own home, this offer is less desirable than a slightly lower offer with no contingencies. You need to look at the offer as a whole, not just at one or two aspects. Sometimes getting the right price causes sellers to overlook problems that could arise from the close dates or mortgage contingency dates. They are so overjoyed with the price that these issue recede into the background only to cause havoc later as sellers find themselves unsure whether to pack and move because the mortgage commitment date is so close to the close date.
COMPONENTS OF AN OFFER
There are at least five components to most offers: (1) sale price, (2) inspection contingency, (3) amount in escrow at contract signing, (4) financing, and (5) date of closing.
1. SALE PRICE
The first component is the sale price. Most negotiations start with an offer price that is not their final one. If the offer price is too low, you may want your listing agent to go back to the buyer agent and explain that the offer is too low to begin negotiations, but they are invited to come back with a higher offer. When is an offer too low? Normally, when you take the midpoint between their offer and your list price and it is below a sale price that is acceptable to you, you should not make a counter offer.
2. INSPECTION CONTINGENCY
The second component is the inspection contingency. Most buyers will want an inspection before they buy the home. Check on the deadline for this contingency. You can still market your home during the period of the inspection, but your home will be listed on MLS as CTS (Continue to Show) and the number of showings will slow down because buyers usually don't want to see a home that already has an offer on it. You want the inspection to take place as soon as possible, because if you need to put your home back on the market, less time will be lost.
If the buyer does not want a home inspection, this has value to you as a buyer, especially if they are willing to go to contract in less than a week.
Sometimes inspections end up as secondary negotiations as buyers look to shave a little more money off the sale price. I encourage my sellers to make it clear to the buyer's agent that the final agreed upon sale price is an "as is" sale with no room for negotiating inspection items, unless there is something major that comes up that would be a deal breaker, such termites. If termites are found to be active, this has to be remediated by the seller or the buyer cannot get a mortgage.
3. IN ESCROW
The third component is how much the buyer will put down at contract signing, so that if the buyers change their mind and walk away before closing, you have some compensation for your trouble. Be careful if the buyer is putting very little down as even a slight downturn in the market before closing makes it easy for the buyer to justify walking away. Ten percent down at contract signing is preferable.
The fourth component is the financing. Cash is the most desirable form of financing, especially if the buyer doesn't require an appraisal. You'll want to make sure there are proof of funds and that there is at least 10% down at contract. Most buyers will need mortgages
5. DATE OF CLOSING
The fifth component of an offer is the closing date. Most closings are scheduled for 60 days from accepted offer, but sometimes a buyer wants a shorter or longer closing time. Be careful in a declining market of a long closing time as the value of the home can decline to the point where the buyer wants to renegotiate the sale price or they will walk away. Yes, you may get to keep the amount in escrow, but if the market drops steeply it may not cover the drop in value or compensate for the lost time on market. If a buyer wants to close too soon, you may have difficulty moving out in time and arranging housing for yourself. You also want to look at the length of time between the mortgage contingency date and the closing. If it is less than 30 days and the financing falls through, you may have packed up your home and have to unpack it. You don't want to sign a lease or commit to buying another home until you are contingency free.
OFFERS AND COUNTEROFFERS
Having examined the offer as a whole, you will want to negotiate the terms of the offer as a whole, and not just focus on price. The offer consists of all the components discussed above. Styles of negotiating vary in different regions and markets, but in Connecticut generally, there are about three rounds of offers and counteroffers and no more than 24 hours between replying to an offer or counteroffer. If the initial offer is too low, it's best not to make a counteroffer, but to instead encourage the buyer to come in with a higher offer before starting the rounds of counteroffers.
Ideally, both sides will counter the same amount and meet in the middle between the initial offer and the list price. Most often the buyer and seller will counter offer the same amount so that within two or three rounds, the midpoint has been reached. If one side is coming up or down a lot more than the other side, negotiations can stall. If agreement is not reached, it does not always mean that this is the end of the negotiating process. Sometimes the buyer will come back a few days or weeks later and make a higher offer after their "final and best" and sometimes the seller will try to reopen negotiations with a lower offer. However, once the buyer has "walked away" it is sometimes hard to get them interested in the property again.
Remember, the offer doesn't mean anything until both parties sign the agreement and have a fully executed offer. A buyer can find another home they like better or a higher offer can come in from another buyer, so get the offer signed by both parties as soon as possible once all the terms are agreed upon. Also keep in mind that until the contract is contingency-free, the buyer doesn't have to buy your home. I've seen buyers run up charges last minute on their credit cards or buy a new car right before the mortgage commitment and lose their financing. Make sure there is enough time between the mortgage commitment and the closing for you to prepare for moving.
Thinking of selling your Greens Farms Connecticut home, call Gail Robinson, REALTOR, at 203-521-0768 for a free consultation.