If you’re selling your home, you might receive multiple offers from prospective buyers. So, the smart move is to pick the highest one, right? Not always. Price is one of many considerations when deciding which offer is best for you and your home. Here, Trulia discusses some of the other factors that matter when selling your home, and how each one could affect your choice.
Contingencies
Most buyers include some contingencies with their offer. Contingencies are things that must happen within a set amount of time for the deal to go through. The general rule: the fewer contingencies and the shorter the time period, the better. The most common contingencies are inspection, financing and appraisal. With an inspection contingency, the buyer can back out if an inspector finds a major problem or too many issues with the home. A finance contingency lets the buyer out if they can’t secure a mortgage, and an appraisal contingency goes into effect if the house appraises for less than the offer amount.
All-cash buyer
You typically won’t get the highest offer when a buyer is offering all cash. But this often is the safest offer. Cash is more appealing than a finance offer, because the seller doesn’t have to worry about the bank approving a buyer’s loan.
Buyer pre-approval
Not many people can pay cash for homes. So, a pre-approval letter is the next best thing. This letter comes from a lender and assures home sellers that the buyer can obtain the loan they need. However, don’t confuse this with pre-qualification. Being pre-qualified does not mean you will be approved, because very little vetting of the borrower is done in the pre-qualification process.
Loan type
There are many types of mortgages, and some are easier to deal with than others. A conventional loan often is the least complicated type, which makes it an appealing choice for sellers. An FHA loan or other types of government-backed loan can cause delays, because they require certain repairs and approvals.
Closing timeline
You might need to close as quickly as possible to move on to your next adventure. A buyer, perhaps an all-cash buyer who can close immediately, will be most attractive to you. Or you might need an extended closing timeline. For example, a buyer who doesn’t want to close for a month or two might save you from having to move twice if you’re building a house and don’t know exactly when it will be finished.
Closing costs
Sometimes the offer is high, but the buyer asks you to pay all or a percentage of their closing costs. Closing costs usually are between 2 percent and 5 percent of the purchase price. In some cases, by the time you pay closing costs, the highest offer won’t get you the most money in the end.
Buyer letters
If you love your home and are concerned about its future, a “love letter” from a buyer could assure you that you’re selling to someone who will care for the home as much as you did. A love letter lets you know your home won’t go to a developer or other undesirable buyer.
Repair requests
If the home needs some repairs, but you don’t have the time or money to do them, a buyer who will do them for you might be just what you need. Expect buyers to get an inspection report. That’s standard. Some buyers will ask you to fix some things—or even everything—in the report, and some won’t.
Appliances and fixtures
Do you plan to take your appliances and fixtures with you, such as the refrigerator, washer/dryer, favorite lights and living room furniture? Then a buyer who doesn’t ask or insist on those being part of the deal might put that offer on top.
Earnest money
This is a deposit buyers put down to show they’re serious about buying the house. Typically, earnest money is between 1 percent and 3 percent of the purchase price—the higher, the better for you. Your real estate agent can tell you what the norm for your area is. You can keep the earnest money if the buyer changes their mind about buying in some cases, such as when there’s nothing wrong with the property, but they got cold feet. The larger the earnest deposit, the more confident you can be that the deal will go through.
Offer price
Of course, price matters, too. It might outweigh the other variables mentioned above, or it might not. The highest offer might turn out to be your best one, but find out all of the details before you accept it. If the high offer seems risky—or will cost you a lot in closing costs, repairs or other factors—then it probably won’t be your best offer.