Like many businesses, real estate experiences highs and lows, sellers' markets and buyers' markets. When the inventory of available homes for sale is modest but demand for them is high, sellers are often left with several attractive offers on the table. These are often bids that reflect or even exceed home values. Yet the dollar figure in each offer does not necessarily determine which purchase overture is superior over the others. At times like this, sellers -- and their realtors and attorneys, if necessary -- do well to look all four corners of each proposal before coming to a final decision.
The Elements of a Purchase Offer
1. Naming the parties to the transaction might appear to be a trivial and fairly obvious component of a purchase offer but accuracy demands it. A seller should always know with whom he or she is dealing: the buyer, a representative or an identity thief, for example. This is the first step in determining the legitimacy of a bid.
2. The price and terms are, of course, the blood and guts of the purchase proposal. When we think of an offer, these immediately come to mind. Do the offers come close to actual home values as demonstrated by appraisals? Does the earnest money presented represent a credible deposit and are the potential buyers willing to lose it in the event of the deal collapsing?
3. Does the offer reflect desirable timing in terms of closing the transaction and vacating the property? Those relocating or selling due to the expense of the property may want to tie things up quickly whereas other owners might seek extra time in residence so children can finish school. Timing could be a minor or significant factor.
4. Repairs and concessions cannot be overlooked. Certain restorations are typically a seller's responsibility -- repair or replace a leaky roof, for instance -- while other alterations are up for negotiation. An offer will either contain requirements for the seller to address repairs or allow for concessions that represent the cost of those fixes being performed by the purchaser.
5. Who pays for upcoming property tax and assessment payments should also be determined upfront. The tax period may straddle seller-buyer occupancies so responsibility for the next installment is an issue to be resolved sooner rather than later.
6. Closing costs often fall primarily on a buyer, the seller invariably held responsible for some or all of the realtor's commission. However, a seller can offer to pay for some closing costs in lieu of other obligations, e.g. repairs.
Sorting It All Out
Clearly, sellers must determine priorities concerning these various elements when deciding which of several offers to select. If an owner is barely holding on to solvency and would rather not make another mortgage payment, timing may carry outsized influence in the decision. On the other hand, an older seller who has no interest in rehabilitating a tired home can appreciate a buyer willing to consider concessions as long as the sales price is right. Meanwhile, if all the other elements line up in the seller's favor, he or she may not necessarily frown upon ponying up to help with closing costs.
So, multiple offers, considered side by side, are ranked easily with regard to sales price. Yet other things can matter just as much. What is the seller's highest priority in conveying the property? What comes next, next and next? Some clarity will develop when bids are measured against the seller's best interests.