Selecting the Best Offer
If you have multiple offers on your hands, you earn the right to dictate favorable terms and conditions of sale for yourself. Buyers know that you have a hot property, and the pressure is on them to please you. Whether you have 3 offers or 33 lying on the kitchen table, you face the same dilemma: selecting the best offer.
- Price isn't the sole criteria. The highest offer is far from best if it's riddled with dubious escape clauses, totally out of synch with your time frames, or made by someone who's a week or two away from declaring bankruptcy.
- Pitting buyers against each other is a two-edged sword. On the plus side, a bidding war can catapult the ultimate sale price over your asking price. You may, however, make a major mess of things, if you're not careful. You may scare off all the buyers by making absurdly high counter offers. Worse yet, you may convert multiple offers into multiple lawsuits by inadvertently ratifying more than one offer.
As a seller in a sellers' market, follow these tips to avoid snatching defeat from the jaws of victory:
- Think like a lender. In a strong sellers' market, spirited buyer competition often pushes prices to new heights. Lenders usually support higher prices when they reflect an overall market trend and when the mortgage isn't an excessively high percentage of the purchase price. You determine that percentage, called the loan-to-value ratio, by dividing the loan amount by the purchase price. From a lender's perspective, the higher the loan-to-value ratio, the greater the risk that a buyer will default on the loan. So, as a rule, the lower the loan-to-value ratio, the better the chances of getting loan approval.
- Don't issue more than one counter offer at a time. When faced with multiple offers, you have four options -- accept one, counter one, counter more than one, or reject all offers. If you counter several offers, you may inadvertently end up in contract to sell your house to several different buyers. The one sure way to avoid this scenario is to follow this rule: Counter only one offer at a time.
- Qualify buyers carefully. When you question agents about their buyers, scrutinize each purchaser's creditworthiness, motivation to purchase, and deadline for when they must complete the transaction.Read the Section on Distinguishing Real Buyers From Fakes.
- If you have any doubts about the buyers' financial qualifications, get their permission to contact the lender directly to resolve your questions before accepting or countering their offer. Buyers who have been pre-approved for a loan by a reputable lender have a "Good Borrower Seal of Approval" -- as long as the mortgage they need to buy your house doesn't exceed their pre-approved loan amount.
- Pay as much attention to terms and conditions as you do to price. Sometimes, a lower price beats a higher one. For example, when you evaluate offers, seek terms that fatten your bottom line. If a buyer offers to purchase your house "as is," you don't have to pay for corrective work or worry about getting stuck reducing your sale price because of a bad inspection report.
- If you need a quick sale, the best buyer is the one who can close fastest. Then again, the best buyer may be the one who'll let you rent your house back after the sale if you need a place to stay until the sale of your new home closes. Remember: Price isn't everything if you have other, more compelling needs.
- Avoid conflicts of interest resulting from dual agency. Dual agency occurs when the same agent or real estate broker represents both buyer and seller. If your listing agent also represents one of the people making an offer to buy your house, that agent has a conflict of interest, plain and simple. Most real estate firms have procedures to handle dual agency according to state real estate laws.