The Best Offer Isn’t Always the High One
Some sellers have the good fortune of receiving more than one offer. It’s natural in this situation for sellers to be attracted to the offer with the highest price. But is the highest-priced offer always the best one?
The offer price is important. And from the seller’s standpoint, the higher the price, the better. But real estate purchases are complicated transactions and shouldn’t be judged in terms of the offer price alone.
For example, sellers of a home in Oakland put their home on the market at the beginning of the current seller’s market.
The home was in mint condition and showed beautifully. Six buyers made offers. After careful deliberation, the sellers decided not to accept the offer with the highest price; they accepted the next-best-priced offer.
The offer with the highest price was from well-qualified buyers, but the contract included a financing contingency and a provision that the property appraise for the purchase price.
The offered price was so much higher than recent comparable sales in the neighborhood that the sellers were concerned that their home wouldn’t appraise for the purchase price.
The offer with the next best price was an all-cash offer with no financing or appraisal contingency. The buyers had sold a property and had the cash needed to close in the bank. These buyers also offered to close as quickly as possible. So the deal was done in two weeks.
Another attractive feature of this offer was that the buyers were willing to let the sellers rent the property back for an extended period. This enabled the sellers to avoid a double move. They stayed in the home they sold until they bought a new home.
Recently, the sellers of another home in Oakland chose to work with buyers who didn’t offer the highest price in a multiple offer competition. The home had a brick foundation and a lot of deferred maintenance. The winning buyer made an as-is all-cash offer. The other offers weren’t as-is and included financing contingencies.
The sellers were concerned about the financing contingency because lenders can require that work be done before closing if a home is in disrepair.
Figuring out which offer best suits your needs can be a confusing process when you’re looking at multiple offers. Some agents assist their sellers by preparing a summary chart to reduce the contracts to their common elements.
Such a chart might look like this: The buyers or the buyers’ agent’s names are listed down one side of the paper. Across the top of the paper, insert the critical contract elements. These elements might include price, closing date, amount of cash down payment, any request for a monetary credit from the seller, any work requested of sellers, rent-back option, personal property included or excluded, financing contingency (and time frame), inspection contingency (and time frame) and buyer’s financial qualification (pre-qualified, pre-approved).
The buyer’s agent can even be a deciding factor if one agent is a professional known for getting the job done and the other agents involved in the multiple offer competition are inexperienced or have less than sterling reputations.
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