The Most Common Mistake Sellers Make When Reviewing Offers
The moment you've been planning for has arrived and you have received an offer on your property! Now what? The most common mistake sellers make is only focusing on the offer amount. An offer is about more than just the sales price, it is important to look at all of the terms in the Purchase Contract and how it will affect your bottom line as well as the time the house is off the market.
- Purchase Price: First, it's a great idea to revisit our original range of value covered in the Pricing and Strategy Meeting. Next, it's important to look at the whole picture and see if this offer helps you achieve your goals. There's a lot that goes into determining if this is a sufficient sales price so it's important to look at the other items as well.
- Earnest Money: This should typically be 1% to 3% of the Purchase Price, but it varies. If there are extenuating circumstances, you may want to request an increase in the Earnest Money amount.
- Downpayment: Typically the higher the down payment the better, but this often depends on the type of financing the buyer is using.
- Type of Financing: There are pros and cons to different kinds of financing. For example, with a buyer using FHA financing, the FHA appraised value sticks with the property for 90 days and is applicable to any future buyers using FHA financing. A conventional appraisal does not stick with the property. If a buyer is using FHA financing the property must pass an FHA appraisers property condition standards as well. Conventional loans do not have this requirement.
- Seller Concessions: Is the buyer requesting that you contribute to their closing costs? How does this affect your bottom line? What happens if the property does not appraise and the purchase price is lowered? Will you still meet your desired net?
- Personal Property Included: Sometimes a buyer will ask for personal property in a purchase contract. If you would like to receive compensation for these items they will need to be dealt with outside of the contract in a separate bill of sale.
- HOA Fees: The HOA Disclosure must be provided with the buyer's offer. By Arizona law, the seller has to pay any HOA resale disclosure fees. If there are additional fees involved the buyer may request you to pay for them on the HOA Disclosure.
- Close of Escrow Length: They typical escrow for a financed buyer is 30 to 45 days. A cash buyer can close more quickly. If the buyer is asking for a longer than normal close of escrow it's important to determine why and if that will work with your goals. There are tactics that we can discuss to help limit the days your property is off the market, such as shortening up the inspection period, requesting the appraisal be ordered within 2 days after the inspection period is over and making the earnest money non-refundable after a certain time.
- Additional Requests Made By Buyer: The buyer may make additional requests or ask for special terms which could affect your bottom line or the time off the market.
- Property Appraised Value: You might not learn the appraised value until 2 to 3 weeks after contract acceptance. It's important to consider if the property will appraise for the offer purchase price. If the property does not appraise the buyer may not be able to come in with the difference so you may have to reduce the sales price to continue with this offer.
- Repairs: When reviewing an offer, keep in mind that the buyer will have the opportunity to ask for repairs during the home inspection period. Hopefully, you have chosen to complete a pre-inspection so you are one step ahead of the buyers and already either know the repairs needed or have even completed some of the repairs. This puts you in a strong negotiation position from the start.
Have questions? Contact me at 623-252-9350 or cinda@wvhometeam.com.
