When it comes to selling your house, the best offer may not be the one with the highest purchase price. The only way to know which offer is best is to review the whole thing, which means reading a lot of less-than-thrilling details. Depending on the offer, however, the time it takes to read it could be very lucrative indeed.
When comparing purchase offers on price alone, you could miss which offer would net the highest proceeds. Lots of factors enter into that equation. Is the buyer asking for concessions on closing costs? Is the buyer asking for concessions on repair work? Is the buyer asking for early or late occupancy that will impact your net proceeds? Is the buyer asking you to pay for inspections? All of these things need to be considered in calculating the net proceeds of any given offer.
I caution against agreeing to any open-ended concessions requested by the buyer. For example, if the buyer asks you to foot the bill to clear Section 1 and/or Section 2 of the pest and fungus report. Depending on condition of your house, that cost could end up in thousands or tens of thousands, conceivably even in the hundreds of thousands of dollars.
If you want to understand exactly what’s being requested in terms of financial concessions, ask your Realtor. Your Realtor can provide you with a seller’s net sheet for each offer—a long series of numbers starting with proposed purchase price, then detailing all the fees or costs to be deducted from that price as detailed in the purchase offer.
Deductions may include the brokerage fee, title insurance fee, escrow fee, transfer tax, cost of inspections, and any necessary work resulting from those inspections. A buyer may request that you pay to repair or even replace a roof, appliances, and more. Be wary of agreeing to repairs for which the cost is impossible to predict. While you can reasonably estimate the cost of a new roof or a new water heater, without a crystal ball, it is hard to know the cost of clearing Section 1 of a pest and fungus report.
In addition to the financial side of things, as measured by net proceeds, there are other costs to consider—both financial and otherwise. Has the buyer offered to purchase and close in one week, but the purchase of the house you’re moving into won’t close for a month? Where will you live in between and what will that cost you, both in terms of rent payments, moving costs, and the physical and emotional toll? Or, is the buyer asking for a close in six months when your escrow closes in one month and you need the cash from the sale of this house for the down payment on the next?
Did the prospective buyer supply a pre-approval or pre-qualification letter from their lender? Pre-qualification is vastly better than nothing at all, but a pre-approval is vastly better than a pre-qualification. Pre-qualification occurs when a loan officer asks the potential borrower questions about income and credit without any verification. Pre-approval means the lender has verified employment, run credit checks, and more. Consequently, pre-approval is far more reliable. Once a buyer is pre-approved, all they may need is a property appraisal and everything can move forward.
Did one buyer offer a no-contingency close in one week versus another who asked for all kinds of inspections and concessions with a close in two months? Some people are just difficult to work with and as a seller, you can opt not to deal with them. In our office, we have a list of individuals we won’t work with, people who are either obnoxious or perhaps have a habit of making many offers and then cancelling at the last minute. Some people just aren’t worth the brain damage required to work with them.
Note: you cannot refuse to work with someone on the basis of a protected class, be that race discrimination or familial discrimination (you cannot choose to sell your house to someone because they do or do not have children, for example). Your Realtor can help you navigate this potentially litigious area.
All of these considerations, financial and otherwise, are critical in deciding whether to accept an offer. I recommend choosing an expert to help you—a good Realtor can be worth their weight in gold.
If you have questions about property management or real estate, please contact me at email@example.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.