REPRINT FROM SHOWCASE MAGAZINE APRIL 2017
It’s an exciting time to be selling your home! Multiple offers! Bidding wars! Do you take the first offer that you receive? What to do, what to do?! Here are some questions to ask when evaluating an offer on your property:
- DOES YOUR BUYER HAVE A HOME TO SELL IN ORDER TO BUY YOUR HOME?
- IS THE BUYER PRE-APPROVED FOR A MORTGAGE? PRE-QUALIFIED FOR A MORTGAGE?
- IS THIS A CASH OFFER?
First, if the buyer has a home to sell, but the price and terms are favorable, you may be tempted to accept the offer. You must find out if the buyer’s home has passed the home inspection and mortgage appraisal hurdles. If that is the case, then it is less risky for you to consider accepting the offer. If the buyer’s home is not even on the market yet, then it is very risky to accept their offer on your home.
When reviewing an offer on your property, make sure the offer is accompanied by a mortgage pre-approval letter for the buyer. The amount of the loan and the purchase price must match the purchase offer. The letter must state that the buyer’s credit rating, employment, and assets have been verified. This is different than a pre-qualification letter, which is NOT based on a thorough review of buyer’s financial information. Often, a pre-qualification letter is based only on a conversation between the buyer and a mortgage representative.
If the purchase offer is an all cash offer, it is certainly the best offer to consider. Cash buyers can close more quickly because they don’t need time to apply for a mortgage. They can usually close in 30 days. Buyers who need to get a mortgage usually need 45-60 days to close. There is less risk with a cash purchase, because there is NO property appraisal. Buyers who require a mortgage to purchase your home are required to get a property appraisal before they can get a mortgage approval. In other words, your home’s value is analyzed by a mortgage appraiser. The mortgage appraiser inspects your home and compares the size, condition, and upgrades made to your home relative to recent home sales in your neighborhood. Occasionally, an appraiser will determine that your house is overpriced. In that case, the purchase price may have to be renegotiated between you and the buyer. When considering a cash offer, make sure the written purchase offer is accompanied by proof of the buyers’ funds. This can be in the form of a bank or mutual fund account statement, or a letter from a bank representative. The amount on the statement must be equal to or greater than the purchase offer amount.
If you are fortunate enough to receive multiple offers, review all offers carefully! Review all terms of each offer to decide which is the strongest offer:
- CLOSING DATE
- LOAN AMOUNT/DOWNPAYMENT AMOUNT
In a multiple offer situation, buyers are tempted to pay over asking price. While this is very tempting to consider, make sure the price is realistic so your property will receive a satisfactory appraisal. The loan amount should be approximately 80% of the purchase price. A higher loan amount creates greater risk for the buyer to obtain the mortgage. The closing date is important as well. This is because while your home is under contract, it cannot be shown to other prospective buyers. A standard closing date is 60 days after the contract date. That allows buyers enough time to have a home inspection and obtain a mortgage.
Beware of contingencies added to the offer! As I mentioned before, a buyer’s home sale contingency is very risky to accept. In addition, any other unusual contingencies should be evaluated. The contract has standard contingencies as written that protect both buyers and sellers.
You can count on your Realtor to guide you through the process of accepting an offer and getting to closing!
Posted on March 29, 2017 at 9:16 am by Diane Belcuore