Received an offer on your home? Congratulations! But, now what? Navigating offers on your home, especially when you’ve received multiple, can be confusing. You may be tempted to jump on the first or highest offer received, but there’s more to consider than just the offer price. We’ve rounded up some expert advice from our Jovio Specialists on how to best evaluate offers from home buyers.
But first, get prepared:
Before you start receiving offers on your home, you should prepare yourself for what’s to come next. That way, when your first offer rolls on in, you’ll be able to make an informed decision as to whether you should accept, reject, or start negotiating.
The first step in preparing yourself is understanding what to expect when you receive an offer to purchase your home. The best way to do this is by familiarizing yourself with the Purchase Contract and what each section means.
A Purchase Contract, also sometimes referred to as a Purchase Agreement, is a contract between two parties detailing the agreed upon terms and conditions for the sale of a home. It includes the sales price, earnest money deposit, date of closing, and option period–among other things.
Once you’ve familiarized yourself with the key terms and components of a Purchase Contract, you’ll want to take some time to decide which aspects of the sale are most important to you. Are you looking to maximize your proceeds or would you rather find a buyer who can close on your timeline? Whatever it is, understanding what you want from the sale and prioritizing what’s most important will go a long way when it comes down to deciding whether to accept or reject an offer.
Now, let’s take a look at the three factors you should pay attention to when evaluating an offer on your home.
Pay attention to the proposed date of possession that’s listed. If you need to stay in the home past this date, you may need to find alternative housing or lease back the property from the buyers for a period of time.
You may want to close on your home as soon as possible or you may want to close within a specific time frame due to external circumstances. For instance, you may need to move quickly to relocate for a job or you may want to hold off on moving until the school year ends.
If the buyer wants to purchase the house sooner, are they willing to do a leaseback? A leaseback is when the buyer allows you to lease the property for a specified amount of time after it’s been sold, which may be beneficial if you need to delay moving. This is common when the seller is waiting to close on another home.
If your circumstances require you to move on a specific timeline, consider whether the buyer can be flexible when it comes to closing. If you need to close faster or stay in the home longer, you’ll want to know if the buyer is willing to work with you.
Every offer you receive will include an expiration date set by the buyer. As the seller, you’ll need to come to a decision on whether to accept, reject, or negotiate the offer and communicate this to the buyer on or before this date.
An all-cash offer often means a quicker and less riskier road to closing, which makes cash offers an attractive option for sellers. Although a cash offer may come at the expense of a lower offer price, the benefit is that you won’t have to worry about the possibility of a low appraisal or third-party financing falling through.
When considering a buyer for your home, you want to make sure things go as smoothly as possible and that means a financially stable buyer. A few good indicators of a buyer’s financial security are how much of a down payment they’re making, the amount of their earnest money deposit, and if they’re pre-approved for a loan.
A buyer may submit an offer with contingencies or requirements that must be satisfied before the purchase can be completed. When reviewing offers, take note of any contingencies in the contract. Some of the most common contingencies include:
All in all, the fewer contingencies the buyer includes, the less chances they have to walk away from the deal and the greater likelihood the sale closes without any issues.
In Texas, the option period sets forth a specific number of days in which the buyer is able to terminate the contract for any reason without risking their earnest money deposit. When the option period begins, the buyer pays a non-refundable fee to the seller, called an option fee. In the case that the buyer does terminate the contract, the seller has the right to keep this money. In a highly competitive market, the amount of the option fee is one of the best signals of certainty to sellers. A large option fee indicates that the buyer is very interested in the property and not afraid to put some skin in the game.
The price at which a buyer is offering to pay for your home is fairly self-explanatory, however there are a few things to consider that may end up affecting your proceeds from the sale. When evaluating the offer price, be sure to take into account the following:
Both buyers and sellers are responsible for paying closing costs. In addition to paying the buyer’s agent and listing agent’s commissions, the seller also pays another 1-3% for other closing costs. Sometimes, buyers will offer to pay for a portion of the seller’s closing costs as well.
For instance, the owner’s title policy–the third largest closing cost for sellers–can often be negotiated. Other seller closing costs that can be negotiated include: escrow fees, home warranty fees, HOA transfer fees, recording fees, and title insurance fees.
Typically, lenders will require a survey to be completed before loaning money to the buyer. Title insurance companies will usually request a survey as well. Oftentimes, the buyer will opt to use the seller’s existing survey, if they have one. If the seller is unable to locate their survey, a new survey will need to be drawn up. Buyers or sellers can pay for this expense so be sure to check whether or not the buyer is requesting that you front the bill.
Survey coverage is additional coverage to the title insurance policy and protects the buyer against any errors with the survey. Generally, if the buyer is relying on an existing survey provided by the seller, they will likely opt for this coverage in their policy. Survey coverage is a negotiable item and can be paid by either the buyer or seller. Pay attention to whether or not the buyer has proposed that you pay for this coverage.
A home warranty covers the cost of replacing or repairing many home appliances and systems if they break after the buyer has purchased your home. Home warranties are not required, but are often purchased by a buyer when they close on a home. In Texas, the seller is usually responsible for paying the cost of the buyer’s home warranty. Be sure to look out for this in the purchase contract.
If your situation requires that you stay in your home a bit longer, you may opt for a leaseback in which the buyer allows you to lease the property from them for a specified amount of time. In some cases a buyer may require that you pay rent during that time or they may allow you to stay in the home for free. In a competitive market, a buyer who can be flexible with their move in date may offer a leaseback at no expense to you in order to make their offer a bit sweeter.
Although price can play a major role in which offer you decide to choose, keep in mind these factors as you review offers to ensure you end up selecting the offer that’s best for you. Luckily, when you partner with Jovio to sell your home, we’ll be with you every step of the way. From walking you through offers to handling negotiations, you’ll always have a trusted partner to guide you through the closing process. Have questions about what it’s like to work with us? Learn more about selling with Jovio or give us a call. We’re always here to answer any questions you might have!
*The information provided in this article is meant for informational purposes only and is not intended to constitute legal, financial, tax, or insurance advice. Jovio encourages readers to contact their attorney or other advisors for advice regarding these matters.