So you've made it through getting the house ready to go on the market and having to leave the house for showings, and now - you've received an offer! Ideally the potential buyers have offered you full price or more and the perfect terms for the sale. However, just on the off chance this isn't this case, you want to look carefully at all aspects of the offer (not just the price) and begin a negotiation with the buyers and their agent.
Your agent will be your partner and help you evaluate the terms of the offer. Just as you did when determining the asking price of your home, you'll want to see what the market is doing in terms of the offer you have just received.
What are the different parts of the offer?
What does the offer consist of? Generally the following: purchase price; pre-approval letter for the mortgage amount showing that the buyer is indeed qualified to go through with the purchase; dollar amounts of down payments and dates associated with them; dates outlining contingencies such as inspections, contracts & mortgage approval; what's included with and excluded from the sale, all required disclosures signed by the buyer; the name of their attorney (in Lower Fairfield County, CT we use attorneys to draw contracts), a copy of the good faith deposit check (usually 1% of the offer to be held in the buyer's agent's escrow account) and the proposed closing date.
One of the most important aspects of the offer is whether the buyer can fulfill the terms of the contract with financing. Your REALTOR can check on the pre-approval letter that should be included with any offer by consulting with the buyerâ€™s agent and the buyerâ€™s lender.
What Factors Should You Consider in a Purchase Offer? Before you offer a counter offer here are the questions you'll want to consider:
- How close is the offer to your asking price?
- Will your home appraise for the contract price?
- How large is the earnest money deposit that accompanied the offer?
- Has the buyer asked for assistance with closing costs?
- Has the buyer asked you to make repairs or to give a credit for home improvements? (This usually occurs after the building inspection & we will talk more about this in the next blog.)
- Is the requested settlement date appropriate for your needs?
At this point it is important to decide what your "bottom line" is and then start working towards meeting that through negotiations. Other things to consider are:
- Are there other offers?
- Is it smart to wait for more offers to come in?
- How will you handle it if no other offers come in after a particular deadline?
- What will you do if you accept this offer and something that sounds more appealing comes in?
Making a Counteroffer
As a seller, you have the option of accepting the offer as is, declining the offer, or making a counteroffer. Your agent can give you specific advice about your negotiating stance based on your home and your market, but generally you will need to be prepared to compromise on some aspect of your home sale. It's always smart to have a dialogue with a potential buyer and see where it can lead.
Your negotiations can go more smoothly if you have a clear sense of your own priorities, such as a particular settlement date, the ability to rent-back your home from your buyers, or a minimum price that is realistic to put the deal together. Your agent should have prepared a document showing you net proceeds at different sales prices that can make it easier to understand the value of different offers.
Negotiations proceed best when both you and your buyer respect each otherâ€™s needs and interests and come to an appropriate compromise with the help of your agents.