Your house is on the market and there is a shortage of housing. As a seller, when this happens it appears that you are on the winning side and should receive multiple offers. At the same time, you should watch for red flags that may be present when a buyer makes an offer. Many times, sellers think higher offers are always more appealing, and in a market where multiple offers are frequent, this creates an environment where missteps may occur. Sometimes sellers are willing to accept a lower offer because they feel there may be less headaches and a greater chance of success during the closing phase. Following list are factors you may want to consider prior to accepting the highest bid:
Buyer’s offer higher than list price – Sellers need to have a good understanding of what their property is worth. If the offer includes buyer financing, then the seller needs to understand that a financial institution will not support a loan that is greater than the appraisal amount. The only way a seller should consider an offer of this natural is if the buyer agrees to cover the difference between the actual appraisal amount and the amount offered by buyer. If an offer comes from a questionable buyer who may not have a genuine interest in moving forward, the seller should consider not moving forward with the offer. In this situation the buyer may not be making the final decision. It may be a parent or someone else, and there is a possibility they may backout for some reason.
Buyer that has contingency – If contract offer has contingency written into the offer be sure to understand the language and what it means. When the seller is aware of some problems with his property, it may be wiser to take the lower offer with fewer contingencies.
Cash buyer – When there is a cash buyer, normally cash is always king. The seller should have a letter of proof of funds from the buyer’s financial institution written on their letterhead and signed by an appropriate officer prior to accepting the contract offer.
Buyer’s Lender – Seller needs to have assurance the buyer’s lender is taking necessary steps to approve the buyer. Is the underwriting staff in-house, within the area and are they verifying income and assets? Recommend the seller or his agent speak with the lender to verify these facts. Sometimes buyers will switch lenders and/or use an internet site. At the same time buyers may randomly select an anonymous internet lender who works with a large bank. If the buyer is not familiar with the institution this may be slow and cumbersome. This is a red flag to the seller. Another time listing agent needs to have a discussion with the seller when you receive the highest offer from a buyer in a multi-offer environment, and the buyer has zero down payment.
Closing timetable – Closing date needs to be factored in before signing a contract. If the closing date is too soon or too far away it may be advisable to accept a different offer. A short-term funded leaseback agreement can be a helpful approach to assist the seller’s needs. Do not sign a lease agreement to allow buyer to move-in prior to closing. This has too many potential problems. If the seller needs to close quickly for legitimate reasons working with a cash buyer may be the best option.
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