Earlier this month, I listed a cute little one-story home on a Thursday morning. By the next morning, there were 7 offers. Before the Saturday afternoon cutoff time, there were an additional 5 offers. The following explains how the seller determined which offer to accept.
The home was listed at $125,000. ALL the offers were at or above list price. This is a very competitive price point in the Dallas area, and one-story homes are especially appealing.
All the buyers agents, and in one case an unrepresented buyer, were told this was a multiple offer situation and all either agreed we had their clients' highest and best offer, or they changed the offer to make it the highest and best.
I prepared a spreadsheet for my client with all the particulars of each offer condensed onto one page for an easy side-by-side comparison.
I entered the details of each offer, such as the offered amount; request for seller contribution towards closing costs; amount of earnest money; the title company; the amount of money requested from the seller for the first year of a residential service contract (home warranty); closing date; amount of the option fee and number of days; the type of payment (cash/loan and FHA or conventional - there were no cash offers); if proof of funds/pre-approval letter was received with the offer; if the signed seller disclosure notice was received with the offer; amount of money down vs. amount financed; who would be paying the HOA fees; and other important information.
Once all the details were in the spreadsheet, I sorted it from the lowest grossing offer to the highest based on just the offered amount and the seller contribution towards closing costs.
It was tempting for my seller to look at just the best few in terms of the amount she'd put in her pocket, but we went through all of them.
Some of the things that got offers tossed aside?
- Incomplete offers where not all the fields were filled out (this, despite my reminders to the buyers agents who submitted incomplete offers )
- One buyer wanted the title company to hold just $500 in earnest money (1 to 2% is common here)
- The amount requested for the seller to contribute to the first year of the home warranty
- Closing dates far in the future
- The number of days for the option period
- The amount of the option fee (one buyer was willing to spend just $1)
- High number of days for the third party financing approval
- Closing date on the Sunday of Memorial Day weekend (really!)
Once the seller weeded out the non-competitive offers, she focused on her top four. All four were at least $5,000 over the list price. Three were conventional loans, one was FHA.
The seller selected an offer that eventually closed. It was a clean offer, with all fields filled in, and both the pre-approval letter and the signed seller disclosure notice came in with the offer. Although the cash down on this conventional loan was only 3.5% and other offers were in the 15-20% range, other factors weighed in more heavily. The buyer stripped all the "extra" stuff out of the offer. She didn't ask for help with closing costs. The amount of the earnest money was more than 1% to show good faith. The buyer agreed to pay the cost of a new survey if the seller's survey wasn't acceptable to the title company. She didn't ask the seller to pay for the first year of a home warranty. She asked for only a 5-day option period. And she certainly offered more than $1 for that privilege.
The difference in the estimated net-to-seller between the top two offers considered was less than $1,000. More than half of that difference? The other buyer wanted the seller to pay up to $520 for the home warranty. Had that not been in there, would the seller have chosen that offer? Maybe. They were offering double the amount for the option fee and just two days longer. Theirs would have been a quicker close (by 4 days). They were going to put down 15%.
One other thing the new owner did was to write a personal note to the seller explaining why she wanted THIS house. Her agent told me that she had lost out on at least 10 other homes - due to multiple offers - and this was THE one for her. That was reflected in the clean offer with just the right amount above the list price to make it hers.
And yes, it did appraise! Barely. After a second appraisal.
If you're a buyer, to get YOUR offer accepted by a seller, consider ALL factors, not just price!