How To Evaluate Offers On Your House

How Do I Start Begin Analyzing Offers?

After much thought and deliberation, you have finally decided to sell your house! Shortly after being on the market, you become overwhelmed with several offers. Stress begins to set in and you are left wondering which of these offers to even consider. Having multiple offers on your house is a great thing, but can create a mountain of stress for you. This article will help you determine which offers work best for you, and how to pick one.

The offer price in a  real estate contract is one of the first items you will see. This is because it is usually the most imortant. When evaluating offers, you need to have a price in mind that you cannot go below. This will help you filter out offers that are well below this number. But keep in mind, net proceeds is what you are after. This is the amount of money you will walk away with at closing. 

According to the National Association of Realtors (NAR), 87% of home buyers financed their purchase in 2021. This means that the majority of your buying pool will be using a mortgage to buy the home.

Conventional

Conventional mortgages are mortgages offered by traditional lenders such as banks and credit unions. Most conventional mortgages require a down payment of 5-20%. These mortgages are typically used by buyers with great credit, adequate cash reserves, and strong debt-to-income ratios.

Government Insured Loans

Popular government insured loans are FHA, USDA, and VA loans. Buyers with lower credit scores or buyers that do not have high cast reserves to put down towards the purchase make up the majority of applicants in this pool. One thing to keep in mind, these loans typically have many requirements that the home must meet in order to qualify. For example, FHA loans have a clause known as minimum property standards. Although FHA considers normal wear and tear to be acceptable, they will not insure a loan for a house that has missing handrails, cracked or damaged exit doors, dry wall damage, plumbing leaks, evidence of termites, or poor workmanship. If you are wanting to sell a home as-is that has multiple issues, offers using an FHA mortgage would not be ones to consider.

Cash

 Cash offers are the strongest offers and should always go to the top of your list when evaluating a multiple offer situation. A cash buyer does not depend on a bank or an appraiser to secure the purcahse of your house. This means you can get to the closing table much faster with this buyer as well.If you are needing to sell as fast as possible, this could be your most valuable offer.

A contingency in a real estate contract is simply an event that must take place for the contract to officially become binding. If all of the contingencies in a contract are not met, the contract officially becomes voided, and one party (often the buyer) can walk away without facing any consequences. The most common contingencies in a real estate contract are inspections, financing, the sale of the buyers current home, and the appraisal.

Appraisal

An appraisal contingency means that if the value of the property does not meet or exceed the agreed to purchase price, the buyer can walk away from the purchase without losing their earnest money. Buyers will usually attempt to renegotiate the purchase contract if the home fails to appraise for the purchase price. In a seller's market, it is common to meet the buyer "half-way" if they are serious about buying your house. Your agent or other professional is a valuable resource during this scenario.

Financing

A financing contingency is where the buyer needs to secure financing in order to purchase the home and the contract will give the buyer a certain amount of time to fulfill that duty.  Although it is common to require a prequalification letter in all offers; these are just letters stating the buyer has met preliminary qualifications. Once an official contract has been executed, the buyer will go through a more rigorous screening by their lender.

Inspection

This contingency allows the buyer a specified amount of time to have the property inspected. Most will hire a qualified professional to come out an view the property. Once getting the inspection report back, the buyer can negotiate repair items, continue to purchase the home with no repairs, or walk away from the purchase if the repairs are too much.

Home Sale

Some buyers need to sell their current home in order to buy yours. This can become tricky if you are needing to sell your house fast. One way to protect yourself as the seller is sign a kick-out clause with the buyer. This means that you can continue to market the property, and if another qualified buyer steps in, they have a certain amount of time to waive the home sale contingency and move on with the purchase.

Common requests during a home sale is items that convey. This simply means things they want left in the home. The most common items are stoves, fridges, and microwaves. But you could get an odd one. Some buyers may want your living room furniture, or for your bedroom suite to stay. Remember that these items have value and should be considered when evaluating offers.

 One of the best ways to evaluate that commitment is the amount of earnest money they are willing to put down. Earnest money is a deposit a buyer puts down on your house that represents their good faith to buy the home. But, if you have a buyer that has several contingencies, they can easily walk away. Consider offers with lower earnest money, but willing to waive contingencies as stronger offers.

Final Thoughts 

Always begin this quest with answering the question of why are you selling the house. This will always be your foundation. Remember to analyze net proceeds over the offer price. You could walk away with more money from lower offer prices if the buyers are waiving other things. Although it can be extremely stressful to analyze a multiple offer situation, it's still a great thing to have! Remember to seek counsel and advice from trusted professionals and friends. In the end, it's your house, and only you can make the decision on what offer works best for you!.

*These articles are not a substitute for legal advice. All real estate transactions should be reviewed by an attorney that is knowledgeable about the laws and rules of your state.