Congratulations! Your home has received multiple offers! When selling your home, receiving multiple offers is the best case scenario. You may feel uncertain about which offer to choose as you are being pulled in opposite directions by compelling offers that meet differing needs. Luckily, Michele Harmon Team can help you navigate a multiple offer situation! We can help you understand and detect the merits and faults of an offer. Believe it or not, selecting the best offer may not always be about the price!
The benefits of hiring Michele Harmon Team are numerous. However, our Transaction Coordinator plays a significant role in creating an exceptional client experience. Our Transaction Coordinator, Jen Gannon, is responsible for handling files from contracts to close. She sends updates, arranges checks, inspections, appraisals, closings, and everything that is involved after a client is under contract. In addition to these tasks, our Transaction Coordinator simplifies the contract process with a detailed contract summary. See images below.
With our contract comparison chart, you can easily compare offers and our team can help you determine which offer best suits your financial and personal goals. Although your first instinct may be to choose the highest bid, you need to evaluate the following:
- The Earnest Money Deposit
According to Bankrate.com, “earnest money is an upfront payment, also known as a deposit, that demonstrates a buyer’s intent to buy a home. By paying earnest money, a buyer is showing that they are serious about the purchase.” The standard amount of earnest money, in the Houston area, is about 1% of the home’s purchase price. If the buyer chooses to back out of their offer, the seller may be entitled to keep the earnest money deposit. Therefore, the higher the earnest money, the stronger the offer.
- The Contingencies
Most offers have contingencies (provisions) that must be met in order for the transaction to be completed. If the contingencies are not met, the buyer is able to step away from the contract with their earnest money. Contracts with few contingencies are more likely to reach closing in a timely fashion. Some of the most common contingencies include:
- Home Inspection Contingency: The buyer has the right to have the home professionally inspected and they can request repairs by a certain date (typically within five to seven days of the purchase agreement being signed). This may require you to make home repairs for structural defects, code violations, or safety issues. However, most repair requests are negotiable.
- Appraisal Contingency: For a mortgage lender to approve a loan, the home must pass an appraisal. According to www.inman.com, “an appraisal is the estimation of a home’s current market value. A licensed appraiser completes this estimation, which is calculated by comparing the recent sales of homes in the area as to the property that is being appraised.” The appraisal verifies that the home is worth at least enough money to cover the price of the mortgage. (In the event that the buyer cannot make their mortgage payments, the lender can foreclose on the home and sell the property to recoup all or some of its costs.) Generally, the home buyer is responsible for purchasing the appraisal, which typically takes place within 14 days of the sales contract being signed.
- Financing Contingency: A financing contingency (also known as a loan contingency or mortgage contingency), protects the buyer in the event their lender does not approve their mortgage.
- Sale of current home contingency: Depending on the buyer’s financial situation, their offer may be contingent on the sale of their current home. Buyers typically have a window of 30 to 90 days to sell their home before a sales agreement becomes void.
- Title Contingency: Before approving a mortgage, a lender will require the borrower to “clear title” – a process in which the title company reviews any potential easements or agreements that are on public record to ensure the buyer is becoming the rightful owner of the property. It also ensures the lender is protected from ownership claims over liens, fraudulent claims from previous owners, clerical problems in court documents, or forged signatures.
- The Down Payment
Depending on the type of mortgage, a buyer must make a down payment on the house. The size of their down payment can affect the strength of the offer. In most cases, the down payment amount is related to the home loan they are taking out. As a seller, your main concern should be closing, and for this to happen, the buyer’s mortgage must be approved. According to the National Association of Realtors®, the average down payment on a home is 10%. However, FHA and VA loans allow for lower down payments.
If the appraisal comes in LOWER than your contract’s sale price, a buyer with a higher down payment would most likely be able to cover the difference with cash.
- The All-Cash Offer
The more cash the buyer is able to put down, the more likely a lender will approve of their loan. Therefore, an all-cash offer is often ideal for all parties. In addition, the buyer is not required to have an appraisal contingency to ensure the property value is large enough to cover the mortgage, nor a financing contingency. A sales contract with few contingencies has fewer ways for the deal to fall through.
- The Closing Date
Closing day is when both parties sign the final paperwork and make the sale official. On average, the sales process – from accepting an offer to closing – takes between 30 and 45 days. FHA, VA, and USDA loans may take closer to 45 days due to additional paperwork that is required by the buyer. Three days prior to the closing date, the buyer receives a closing disclosure from their lender which they compare with the loan estimate they received when applying for the loan. If there are material differences between the buyer’s loan estimate and closing disclosure, the closing will not be finalized until those amounts are reviewed and approved.
Your personal circumstances will determine whether you need a slow or quick settlement. For example, if you have already purchased your next home, you will probably want to close as soon as possible, or you may need a longer closing period if you need the proceeds from the sale to purchase your new home.
Making a decision
When selecting an offer, clarify what you want and base your decision on your goals. When you are a seller facing a bidding war on your house, you truly have an opportunity to get the terms and conditions you want out of the sale. If you want the most money possible, take the highest offer if it makes sense to you. Remember, it is completely acceptable to accept a lower offer if it gives you what you want – no contingencies, a quick closing, cash, or whatever else suits your goals. In some cases, our sellers select an offer based on an emotional connection with the purchaser.
The bottom line
In most complex situations, there is rarely one simple answer, but Michele Harmon Team can help make navigating multiple offers more simple. When you hire a top producer, like Michele Harmon Team, you reap the benefits of having not one, but multiple licensed, experienced agents and admin working for your best interests. For the same commission as an individual agent, our team provides more availability, attention to detail, a deeper pool of expertise, and a shared goal of providing the highest level of customer service. You have access to specialists in all areas, whether it be staging, marketing, negotiating, buying, selling, or anything in between. Michele Harmon Team combines their knowledge and resources for the benefit of the client. It is our goal to make the process as easy on you as possible. Give us a call at 713-818-1330 to get started today! We will gladly help and advise you every step of the way!