Once you’ve decided “it’s time to sell my home
” and done all of the work to put your home on the market — the cleaning, decluttering, staging, photography, and much more, it’s the moment you’ve been waiting for: selling it and having offers roll in! But, how do you know what makes a good offer?
One with the highest price tag, obviously, right?
There are several factors at play that constitute a good offer. Keep reading to learn more!
The offer price is extremely important and must be what you were expecting — or at least in the same ballpark. It’s important that you get a strong offer because you can use that money for a down payment on your next home or help carry you through retirement. Homes also appreciate very well, so you'll want to recoup your investment. In today’s seller’s market, buyers have even more right to hold firm for asking price or above offers only.
Earnest Money Deposit
The strongest offers include earnest money deposits, which are basically down payments on the down payment so the buyer can show you they are serious about purchasing your home. Once the buyer meets the contract terms and follows through with the sale, the earnest money is released from escrow and can be used towards their down payment. But, if the buyer breaks the contract, you can keep their deposit in exchange for the lost deal.
Earnest money deposits are usually between one and three percent of the sale price of the home. But, buyers can put as much money as they want as the earnest deposit. The more money, the more serious they are about purchasing your home.
Not Too Many Contingencies
Contingencies mostly benefit the buyer because they account for anything that may need to happen for the transaction to keep moving forward, like the seller must replace the roof or paint the house or even pay for the inspection.
You should be wary of contracts containing an excessive amount of contingencies because each gives the buyer the chance to abandon the sale.
An All-Cash Buyer
When a buyer is offering to pay in all cash, you don’t need to worry about them getting approved for a loan, making them a lot less risky and a stronger buyer.
A 20-Percent Down Payment
A low-risk borrower is someone who is well-qualified and puts down at least 20 percent of their home’s purchase price in cash. These buyers are also a lower risk to you as the seller.
If a buyer defaults on their mortgage, the bank can seize the home and re-list it on the market. If the buyer’s down payment was 20 percent of the property’s value in cash, that means their loan was only for 80 percent of the home’s value. This lets the bank re-sell the property fast with a lowered price of 20 percent. They’ll also still break even on the deal this way.
It’s up to you to decide how you want to weigh these factors into your decision. For example, suppose you had a pre-approved buyer offering to put down 15 percent in cash. In that case, you may favor another buyer who’s willing to put down 20 percent unless the 15 percent buyer is offering to pay significantly more for the house.
The closing date is the last piece of the offer you’ll have to consider. The closing date should accommodate both parties’ timelines. But, they can also be used as a bargaining tool if the buyers are trying to move in ASAP because they’ve already sold their house, you can demand more money for an earlier move-in date, or the buyers can prove they have the strongest offer by being willing to accommodate your desired move-out date.