Now is a busy time in the Westfield luxury real estate market. Sometimes, sellers receive several offers at one time. This is definitely a nice problem to have. When evaluating an offer, other options besides money factor into accepting or rejecting it.
Evaluating an Offer: It Isn't Always About the Money
Contingencies
Most real estate transactions include contingencies of one sort or another. Typical contingencies include a home inspection, clearing the title, appraisal, financing, and sale of the buyer's current home. When evaluating an offer, one with fewer contingencies attached looks more attractive, even if the offer comes in lower. Unless they offer substantially more than the list price, a buyer with a laundry list of requests might not be worth the hassle.
All-Cash Offers
With all-cash offers, you avoid certain contingencies (like the financing contingency). This shortens the escrow period and limits the chance of the deal falling through. Also, you don't have to wait for the buyer's home to sell. Likewise for financing. They still may require an inspection or appraisal. And most buyers want the title to clear first. A slightly lower all-cash offer may appear more attractive to you than a higher offer waiting to be approved for a loan. This especially holds true when you need to sell quickly (new job starting up out of state, for example).
Financing
Most buyers require a mortgage loan to purchase a property. When evaluating an offer, see if they have their financing in place right now. If they're waiting for approval or haven't even started the loan process yet, you might want to move on to a buyer whose offer includes an approval letter.
Length of Escrow
Another consideration when evaluating an offer is how long of an escrow the buyer wants. If you have a short time frame to work with before you need to move, a 15-30 day escrow sounds appealing. On the other hand, you might still be looking for another Westfield home to move into. In that case, accept an offer with a longer escrow. Take the offer that works best for your specific situation.
Earnest Money Deposit
Finally, look at their Earnest Money Deposit (or "good faith deposit"). This is the money that the buyer puts down to show that they are serious about their offer. The amount varies (usually about 1-3% of the purchase price). Typically, the title company holds it in a special account. It then gets applied to the buyer's down payment when a deal is reached. However, if the buyer backs out for any reason not specified in the sales agreement, the seller keeps the Earnest Money Deposit for themselves.
Take your time evaluating an offer. Always discuss each and every offer you receive with your Westfield REALTOR®. Use their knowledge of the real estate market to help you decide which offer to accept and which to reject.
Scott Gleason, CRS at RE/MAX Select, Luxury Homes
Originally posted on my Westfield area luxury real estate blog here: http://www.luxuryhomesnj.com/uncategorized/evaluating-an-offer-on-your-home/.
