Picking an offer isn’t always straightforward. While simply taking the highest priced offer sounds like a good idea, it can be a huge mistake. Just because someone signs a contract, does not mean they will actually close on the deal.
If you want your deal to go through the first time, you need to make sure that the terms of the contract, not just price, are solid. Now let’s talk about some common terms to pay attention to when selecting an offer.
There are many different types of financing; conventional, FHA, VA, USDA, and our favorite, cash. If we have multiple offers and all other terms are the same, our personal preferences are cash, conventional, USDA, VA, and FHA in that order. With complex loan programs such as FHA, there are more boxes to check and more chances for things to fall through. Additionally, some loan programs can add weeks to the closing time frame since they take so long to go through underwriting.
Keep in mind that for someone to get a mortgage, the house needs to appraise. If the house does not appraise, then the buyer will have to pay more money towards a down payment. This is a huge problem particularly with FHA and USDA buyers in our experience. Many Realtors will have their buyers submit offers far over asking price offers knowing the home will not appraise. You as the seller will typically need to drop the price down to the appraised price.
A normal inspection period for us in 7 days max! The less days, the better. The point is to provide enough time for the buyer to bring through a licensed inspector and have a reasonable amount of time to review the results. If your buyer is asking for 2 weeks, you need to ask why. Buyers who need long inspection periods can be flaky. Some people use that long inspection period as a way to lock your house up while checking the market for a better deal.
Closing Time Frame
As mentioned earlier, government-backed loan programs take longer to close than cash, conventional, or private loans. A standard closing is between 30-45 days. If your buyer wants 50-60 days, this is unreasonable and you need to figure out why.
Many buyers do not have enough money for their down payment and closing costs. They may need $12,000 in down payment and closing costs, but only have $6,000 in savings. These buyers regularly request that the seller contribute $6,000 towards the buyer’s closing costs. Keep in mind, that this would come out of your proceeds at closing and these buyers are usually a little less reliable.
Earnest money deposit
The last topic here is the earnest money deposit. The standard is $1,000, but we always ask for more. If the house costs $500,000, this should be more in the range of $5-10,000. For a $200,000 house, we usually want at least $2,000. If a buyer is not willing to increase the earnest money deposit, it is possible they do not have enough money in savings or are not fully sold on the house. Either way, it is a bad sign.
When you are ready to sell your home, choose an agent who has been there before and has a plan to navigate the tough stuff. Choose a J&J Realtor and experience something better. Call us today or fill out the form here to get in touch.
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