UPDATED: Sep 1, 2022
In a perfect world, you’d list your house for sale and in a matter of hours, get a dream offer – one that’s thousands of dollars over the asking price, has great terms and comes from a home buyer who has already secured financing. But in the real world – and in this current housing market – choosing a buyer for your home can be a little more complicated. It’s common for sellers to receive multiple offers and struggle to pick the right one. If you’re wondering how to choose a buyer for your house, follow these six steps for success.
It can be difficult for sellers to determine the best offer as there are multiple aspects of a bid to consider. To simplify the decision-making process, we’ve come up with step-by-step instructions for properly assessing your options.
Knowing what you want and don’t want ahead of time will help you weed through offers on your home when they start coming in. By having a number in mind, you can stay grounded enough to look at other factors when you get a high offer and to know when a potential buyer is truly lowballing you. Discuss your ideal purchase price with your real estate agent, who can make recommendations and set realistic expectations based on your home, comparable homes in the area and the current market conditions.
Remember that, although the purchase price is a crucial part of any offer, it shouldn’t be your only determining factor. There are other parts of the offer you should consider – ones that could make the highest offer no longer the best offer.
A contingent offer comes with certain clauses. It allows the buyer to back out of the deal without losing their earnest money deposit if something happens involving any one of the contingencies listed in their offer. For example:
The problem with contingencies is that you may miss out on a different offer by accepting one with contingencies only to have the deal fall through.
Before listing your home, you’ll want to have a general timeline of when you’d like to close on your home. This can be based on when you need to move into your new home, on specific dates, like before the holidays or first day of school, or any other personal preference. With this time frame in mind, it may help you knock out some potential offers or choose ones above others. That’s because a home buyer’s time frame can affect the sale of your home, your purchase of another or your plans for other things. You may need extra time after closing to move. If you have a buyer who refuses to allow extra days or weeks before moving in, you could get stuck in a bad situation. Or, if you’re trying to sell your home and your purchase of a new home is dependent on it, a buyer who’s dragging their feet or struggling to get financing could cause your sale to fall through.
If the buyer you choose fails to get financing, it could break the deal. One way to help avoid this from happening is to review each potential buyer’s financing. Now, you can’t go asking for bank statements and W2’s, but there is some information you will have that could indicate potential issues:
Closing costs are fees paid to the lender for processing the mortgage loan. They’re about 3% - 6% of the cost of the home and most of the costs are typically paid by the buyer. While sellers will pay some closing costs on their end, including their agent’s commission, home buyers may request the seller pay the buyer’s closing costs, too. This is known as a seller concession. This will be something to consider when reviewing offers because it could affect the final amount of money you’ll get from a sale. An offer that’s over the asking price but requests that you pay seller concessions may not be a better offer than one that’s just at the asking price, with no concessions. It may depend on what you end up paying. If you agree to seller concessions, you can review all your costs on your closing disclosure.
An earnest money deposit, also known as a good faith deposit, may not be as important as other offer terms, but it can be helpful as a tiebreaker. When you have two similar bids and one has a bigger earnest money deposit, you may want to choose that one.
Earnest money deposits show the seller that the buyer is serious about purchasing the home because, if they walk away from the deal, they could lose that money. Therefore, the larger the earnest money amount, the less likely it is that the buyer will break the deal.
When selling a home, expect to receive many bids and counter offers and make sure you repeat the assessment process for each prospective buyer to make sure you can clearly see the best offer for your goals. This is just one way to help make the selling process a little easier. Other ways to ensure a smooth sale are to learn about every step of the selling process and to learn more about potential closing issues that could affect you later on.
Home Selling - 8-Minute Read
Lauren Nowacki - Apr 26, 2023
Selling a house can be exciting, but there is a lot to remember during the process. Check out our step-by-step guide and learn how to sell your house.
Home Selling - 8-Minute Read
Erin Gobler - Apr 24, 2024
Home Selling - 8-Minute Read
Carey Chesney - Dec 29, 2023
Nervous about selling your house quickly? Find out what inspectors look for, and learn more about the things that might fail a home inspection.