How To Evaluate An Offer
Let’s review how we recommend you evaluate an offer for your home. Here are some of the more important items we recommend you consider. Of course, with any offer we will talk you through the process to make the best decision possible.
This information is provided to give you an overview of how to review an offer. There are nuances and grey areas to every aspect of a real estate contract and this information is not intended to be comprehensive or explain every situation. We should review any offer together with consideration to your particular situation. Let us know if you have any questions or need further explanation.
Before we begin let’s start with a few FAQ’s.
Q – How long do we have until we need to respond to an offer?
A – Our standard contracts in Texas do not include a time period when you are required to respond.
Unless we are anticipating multiple offers or you have set a deadline to review offers most buyers will expect you to respond within 24 hours.
Sometimes we have a client who has sold a home in another part of the country or another part of the world where real estate practices are different and sellers have 7-10 days to review an offer. That is not standard for our market and should you wish to wait that long I expect any buyer will rescind their offer for your home.
When negotiating a contract we have seen the best results by keeping the ball going back and forth. If our experience tells us we expect to have multiple offers that may change the strategy. Otherwise when there are too many delays it is more difficult to reach an agreement.
Q – What are our options?
A – You can accept the contract as-is, reject the contract or make a counter offer proposing changes to any of the terms in the contract.
Q – Can you give us advice?
A – Yes, as your Broker I will provide you with expert advice based on our experience with what we are seeing in the market and the contract terms. Keep in mind that we are not able to give “perfect advice” and when we are dealing with people, money and emotions buyers may not act as expected.
Important Items In The Contract
You probably aren’t selling your home just for fun so the sales price is likely an important factor. The sales price is self-explanatory.
Total Financial Package
Is the buyer asking you to pay some of their closing costs (lender fees, etc.)? Who is paying for the title commitment? Is the buyer asking for a credit for a Residential Service Contract (AKA…home warranty)? Is the buyer asking you to pay for a new survey?
A $300,000 offer where the buyer is asking you to pay for $5,000 of their closing costs is less valuable than a $300,000 offer without paying any of the buyer’s closing costs.
When can the buyer close? A closing date within 30 days may have more value than an extended closing especially if your home is vacant.
Remember, the closing date is negotiable but once a contract is signed it can’t be changed without the buyer agreeing to the new date.
Does the buyer have to sell a home before they can purchase yours? This will complicate your sale and may or may not be something you want to consider.
Most offers will come with a financing and appraisal contingency unless the buyer waives those rights.
The appraisal contingency is a grey area of the contract. However, in most cases the home needs to appraise for the sales price and not the loan amount.
Option Money and Option Period
Option money is paid by the buyer directly to you as the seller. This money is not refundable. By giving this “consideration” it allows the buyer to have the termination period where technically the buyer can cancel the contract for any reason and receive a refund of the Earnest Money. This option period/termination period is also generally the time when a buyer will perform their inspections (technically inspections can be done at any time).
It is standard for option money to be anywhere from $100-$500 and the option period to be 7 days. This will depend on the sales price, how long the home has been on the market and the interest level and motivation from the buyer.
Earnest money is money deposited by the buyer with the title company as a sign of good faith. Sometimes sellers put too much emphasis on the amount of earnest money. Keep in mind earnest money is refunded if the buyer cancels the contract for any of the reasons that would allow them to request a return of the earnest money. Remember, our goal is to sell the house and not get into a legal dispute over earnest money.
Is the buyer paying cash or using financing? What type of loan and the amount of the down payment may indicate if the buyer has the financial means to close on the sale.
We estimate a cash buyer being worth about $5,000 however it could be worth more or less to you depending on your particular situation.
Is the buyer asking you to have the carpets steam cleaned or the home professionally cleaned prior to closing? Are there any other requests that will cost you time and money? These items need to be negotiated prior to signing a contract.
Likelihood Of Closing
Sometimes in an offer or leading up to the offer a buyer may indicate they are going to be flaky. For many sellers having a solid buyer may be worth more than an extra $1,000. Going under contract isn’t as important as making sure the buyer will actually close on the sale.
Fair Housing Notice
You may have questions about the buyers we may not be able to ask or answer (Do they have kids? Etc.). Please remember we have to encourage you to make a decision considering fair housing laws.
“In accordance with fair housing laws and the National Association of REALTORS® Code of Ethics, Broker’s services must be provided and the Property must be shown and made available to all persons without regard to race, color, religion, national origin, sex, disability, familial status, sexual orientation, or gender identity. Local ordinances may provide for additional protected classes (for example, creed, status as a student, marital status, or age).”
Have a Question?
Contact Us Now!