When it's time to sell, it's important to understand there is more to a home purchase offer than just price. Sellers want their home values to be high but there are many other components to a purchase offer to consider. Each component carries varying levels of importance. In today's market, the inventory of homes available to purchase is low. As you may receive multiple offers, it's especially important to determine which offer is the most sound.
You Want a Financially Strong Buyer
A financially strong buyer is key as there is a better chance they will be able to close on time. If the buyer isn't paying cash for your home, ask to see a pre-approval letter from the buyer's mortgage lender. If the buyer is obtaining a mortgage, a strong buyer will be able to put down a higher down payment. For example, a buyer who is putting down 20 percent is stronger that a buyer who is only able to put down five percent. Also look at the type of loan the buyer is receiving as obtaining a conventional loan shows strength.
"House to Close" or "House to Sell" Contingency
Some buyers have a house they need to close on before they can purchase your home. Sometimes they'll have it listed and already have a contract on it, so they simply need to close. Others will still need to list the home and sell it. Waiting for a buyer to sell and/or close on a home is more risky. It can waste precious time and money if they are not successful.
The Attorney Review and Inspection Period
Almost all real estate contracts allow for the buyer to have three to ten days to have an attorney review and for the buyer to have a professional home inspection performed. Attorneys are more common in some states than others, so the attorney review may not be applicable. Sometimes buyers are so confident about the home purchase that they will waive the home inspection. Home inspectors will document major defects and safety issues with the home. If a buyer has a home inspection performed, he will typically ask the sellers to repair, replace or provide a monetary credit for the inspection issues. This can cost sellers hundreds or even thousands of dollars.
The Closing Date
The closing date is an important consideration. Sellers usually have a closing date that is more convenient for them. A buyer willing to close when it's convenient for the sellers is better.
Home purchase offers call for an amount of earnest money that a buyer will put down to show how serious and confident they are about purchasing the house. A buyer willing to put down more earnest money is as stronger buyer. An average amount of earnest money in today's market is approximately one to five percent of the purchase price.
Fixtures and Personal Property
There is a section on most purchase offers where the buyer checks which fixtures and personal property they want to remain with the home. Most sellers leave everything that is attached such as shelving, light fixtures, mirrors and so on. However, some buyers ask for furniture. If the buyer asks for personal property including furniture you were planning on taking, be sure to take it into consideration in regards to your net sales price.
Property Tax Proration
Most purchase offers have a line to fill in for the property tax proration. This is the tax credit that a buyer will receive at closing. It's common to negotiate 100% to 110% in tax credits. Obviously, the less they ask for, the better.
Some buyers ask for a home warranty. These can cost anywhere from $400 to $600 or more. Sellers should take this cost into account in their net sales price.
Your real estate broker can guide you in determining the strength of an offer you receive as well as comparing offers when presented with a multiple offer situation.