6 Tips for Choosing the Best Offer for Your Home

Have a plan for reviewing purchase offers so you don't let the best slip through your fingers.

You’ve worked hard to get your home ready for sale and to price it properly. With any luck, offers will come quickly. You’ll need to review each carefully to determine its strengths and drawbacks and pick one to accept. Here’s a plan for evaluating offers.



1. Understand the process. 
All offers are negotiable, as your agent will tell you. When you receive an offer, you can accept it, reject it, or respond by asking that terms be modified, which is called making a counteroffer.

2. Set baselines.
Decide in advance what terms are most important to you. For instance, if price is most important, you may need to be flexible on your closing date. Or if you want certainty that the transaction won’t fall apart because the buyer can’t get a mortgage, require a pre-qualified or cash buyer.

3. Create an offer review process.
If you think your home will receive multiple offers, work with your agent to establish a time frame during which buyers must submit offers. That gives your agent time to market your home to as many potential buyers as possible, and you time to review all the offers you receive.

4. Don’t take offers personally.
Selling your home can be emotional. But it’s simply a business transaction, and you should treat it that way. If your agent tells you a buyer complained that your kitchen is horribly outdated, justifying a lowball offer, don’t be offended. Consider it a sign the buyer is interested and understand that those comments are a negotiating tactic. Negotiate in kind.

5. Review every term.
Carefully evaluate all the terms of each offer. Price is important, but so are other terms. Is the buyer asking for property or fixtures -- such as appliances, furniture, or window treatments -- to be included in the sale that you plan to take with you?

Is the amount of earnest money the buyer proposes to deposit toward the down payment sufficient? The lower the earnest money, the less painful it will be for the buyer to forfeit those funds by walking away from the purchase if problems arise.

Have the buyers attach a pre-qualification or pre-approval letter, which means they have already been approved for financing? Or does the offer include a financing or other contingency? If so, the buyers can walk away from the deal if they can't get a mortgage, and they'll take their earnest money back, too. Are you comfortable with that uncertainty?

Is the buyer asking you to make concessions, like covering some closing costs? Are you willing, and can you afford to do that? Does the buyer’s proposed closing date mesh with your timeline?

With each factor, ask yourself: Is this a deal breaker, or can I compromise to achieve my ultimate goal of closing the sale?

6. Be creative.
If you’ve received an unacceptable offer through your agent, ask questions to determine what’s most important to the buyer and see if you can meet that need. You may learn the buyer has to move quickly. That may allow you to stand firm on price but offer to close quickly. The key to successfully negotiating the sale is to remain flexible.

Crunching the numbers on competing purchase offers

Sellers are inclined to go with the highest-priced offer when they receive more than one. But, price is only one factor to consider. An offer with a lower purchase price but a large down payment and a quicker close could be best.

The terms of a purchase offer can make or break a deal, particularly given today's stringent mortgage qualification requirements. Buyers with large cash down payments usually have an easier time qualifying for a mortgage than do low-cash-down buyers.

However, today even large-cash-down buyers need to qualify. Unlike in 2006, lenders now require verification of employment, a great credit record, and one or two acceptable property appraisals. 

A large cash down payment can salvage a transaction that might otherwise fall apart if the property appraises for less than the purchase price. If the lender is willing to loan the buyer up to 80 percent of the appraised value, and the buyer needs a loan for only 60 percent of the price, the deal will probably stay together if the appraised value is 5 or 10 percent lower than the purchase price.

But, if there is an appraisal contingency in the contract, the buyer could decide not to proceed with the transaction, or not at the purchase price, based on the fact that the property didn't appraise for the price he agreed to pay. 

The buyer might try to renegotiate the price to keep the deal together. If the seller doesn't agree, the buyer can usually withdraw without penalty, depending on the wording of the appraisal contingency.

When the appraised value comes in under the purchase price and the buyer is making a low down payment, you're sure to have a problem unless the buyer has more cash to put down or the seller agrees to lower the price, or a combination of the two.

Let's say your home is listed for $775,000. You receive three offers from qualified buyers. One is for $850,000 from a buyer who has lost out in multiple-offer competition repeatedly. He will make a 10 percent down payment, and the contract includes an appraisal contingency. 

The second is for $825,000 with a 40 percent down payment and an appraisal contingency. The third offer is also for $825,000 with a 35 percent down payment and no appraisal contingency. You are told by the buyer's agent that the third buyer has more money to put down, if necessary. All offers include an inspection contingency.

HOUSE HUNTING TIP: One option would be to use a multiple counteroffer that includes a provision to alert the buyers that counteroffers are being issued to one or more other buyers. Acceptance of one of the counteroffers will occur when the seller re-signs the counteroffer after the buyer has signed it. The seller has only one house to sell so the multiple counters must be conditioned on the seller having the final say.

The terms of multiple counteroffers don't need to be the same for each buyer. If the comparable sales don't support a price even close to $850,000 for your home, the offer from the "10 percent down" buyer is risky. You could counter this buyer and ask him to increase his deposit amount and waive the appraisal contingency. You could ask the second buyer to pay $850,000 and remove his appraisal contingency. And, you could increase the price to $850,000 on the third offer.

The risk of this approach is that you could lose one or all of the offers, particularly if the buyers think you're greedy. All offers are for significantly more than the list price.
THE CLOSING: Another option is to not use a multiple counteroffer, but accept or counter the third offer in primary position and counter the second offer for backup position.

Five things to know about a home before committing to buy

Your due diligence inspections should include more than hiring a home inspector to look at the home and reviewing a current termite inspection. And your due diligence should start as soon as you have serious interest in a listing.

Making an offer to purchase a home consumes a lot of time and emotional energy. Before your real estate agent or attorney puts pen to paper, find out as much about the property as you can. In particular, you want to know if there's any reason you shouldn't try to buy the house.

Seller disclosure requirements vary from state to state, as does real estate practice and protocol. Find out if there are any seller disclosure statements and presale inspection reports. If there are, ask to see copies before you write an offer.

In some areas, it is standard procedure for listing agents to provide a disclosure package that includes any existing reports and disclosures to interested buyers before they make an offer. In other areas, reports are made available only after the buyer and sellers have negotiated the purchase agreement. Get ahold of as much information as you can about the physical condition of the property as soon as possible.

After you review the seller's documents on the property, you may discover that the home you find so appealing requires a far bigger investment in repair work than you can handle or afford financially. In this case, move on to the next property with no remorse. You've saved yourself from hassle and heartbreak.

On the other hand, if the reports and disclosures fall within your expectations, move on to investigating the local neighborhood. On closer look, you may discover that there are several large apartment buildings that back up to the house you're interested in buying. This might create a noise factor. If you're sensitive to noise, you might not be happy living in the property you're considering.

Buyers sensitive to crime should check with the local police department to see if the neighborhood is being hit by waves of break-ins. Drive by the property several times during daylight and evening hours to see if the complexion of the neighborhood changes in any way that is disadvantageous to you.

Commuters should drive from the property to work and back during rush hour, and check into all the public transportation options that are available in close proximity. If you're intent on buying within walking distance to shops and cafés, find out how long it takes to get from the house you think you want to the nearest commercial area.

HOUSE HUNTING TIP: It's wise to include an inspection contingency in your purchase offer so that you have a time period to complete whatever inspections of the property you deem necessary before committing to move forward with the purchase. This is recommended even if the seller has completed presale inspections. 

Some buyers who have confidence in the seller's home inspector hire that inspector to do a walk-through inspection with them so that the inspector can explain his report and answer any questions. The fee for this sort of inspection will usually be less than what the seller paid for the initial inspection and written report.

Don't skip inspections to save money. It could cost you plenty in the long run if uninspected items turn out to be faulty and you have to pay to repair them. 

Order a home inspection as soon as possible after your offer is accepted by the sellers. Most home inspections include recommendations for further inspections. If you don't have the home inspection done early, you may not have enough time to complete all the further recommendations recommended, like roof or drainage inspections.
THE CLOSING: If you run out of time, ask the sellers for an extension. 

How To Add Power To Purchase Offer

Figuring out how much to offer on a home you'd like to make your own is never easy. 

A complicating factor is that although it appears that the housing market may be stabilizing, there is no guarantee that prices won't slip further.

With this in mind, don't buy for the short term. Don't buy betting on future appreciation. Buy a home that will work for you long term, at the best price you can negotiate, using financing you can afford.

To avoid paying too much, hook up with a real estate agent who will educate you about how much you'll have to pay for a home that works for you. The Internet is a great resource to help you learn about neighborhoods, current listings, and past sale prices.

However, a diligent, knowledgeable real estate agent who has experience helping people buy and sell homes in the area where you want to live can get you up to speed on what's happening in that niche market now.

HOUSE HUNTING TIP: Ask your agent to give you a summary of all listings that you might have been interested in that sold during the last three months to six months, including list price, sale price and how long they took to sell. It's also useful to have information about the change in average sale price over the past year. Have prices declined? Are they flat? Or are they rising?

Also, ask for a list of properties currently available and pending sale. A pending sale is one where the sellers have accepted an offer, but the sale hasn't yet closed. Significantly more active listings than pending sales in an area suggests a high-inventory market where buyers have an advantage. Few active listings relative to pending sales is characteristic of a low-inventory market.

During your house-hunting education, make sure your agent reports back to you about day-to-day changes in the market. If an overpriced listing has a price reduction and is now in your price range, make a point of looking at it as soon as possible. A new price can attract other buyers' interest.

When listings you've seen sell, your agent should let you know the sale price. This will help you develop a sense for when a listing is priced too high, or priced at or under market value. How well a listing is priced for the market affects your offer strategy.

A well-priced listing in a low-inventory market is likely to sell quickly. There could be more than one buyer making an offer. If so, you may need to make an aggressive offer near, at or over the asking price. However, multiple offers don't always result in a sale price higher than the list price.

Becoming savvy about local market pricing enables you to know when to make a strong offer on a new listing, even though the overall market may be lagging.

It's a different story in segments of the market where there are plenty of listings that take months to sell. In this case, you have choices, making it possible to offer less than the asking price and negotiate. If this one doesn't work out, you move on to the next. You should be prepared to walk away rather than pay too much.

Buyers making offers that are contingent on the sale of another property usually have to pay more than all-cash buyers who can close quickly. If you've already sold your home and are waiting for the sale to close, you'll be in a better position to negotiate on price.The best bet is to have your home sold and closed. It removes uncertainty in the sellers' minds and may make them more receptive to a lower price.