Multiple Offer Situations: Which Is the Best Offer?

You have placed your home on the market and now you have multiple offers.  Congratulations!  Now what do you do?  The first step is to notify all parties that you are now in a multiple offer situation and all parties need to submit their highest, best, and final offers.  Once you have received them all, now it’s time to choose one, but which one?  How do you know which is the best offer?  This seems like an easy question to answer-the highest offer is the best.  This is not always true.  This week’s blog will give you some tips on picking the best offer.

ASKING FOR CLOSING COST CONCESSIONS

It is very common, even for REALTORS®, to look directly at the sales price and no further.  Before deciding on an offer, the reviewer needs to look at the closing costs section of the contract.  If the buyer is asking for closing cost assistance it is in fact lowering the offer price.  I hear it all the time from agents as well.  “I’ve made a full price offer.”  What they don’t see is that the buyer is asking for 3% closing cost assistance from the seller.  If the offer price is $100,000 with 3% closing cost assistance, the seller would have to contribute $3,000 to the sale.  This makes the offer in reality is $97,000 not $100,000

CASH OFFER VS. FINANCED OFFER

When an offer is made with cash there are several advantages.  One advantage is there is no financing contingency period.  Financing contingencies can last from 30 to 60 days.  This is time the property is off the market and not being actively marketed for sale.  If the financing falls apart after this deadline, the contract is dead, the buyer gets their deposit back, and the seller gets to start all over again.  With a cash offer, you don’t have to worry about this time period and can close a lot sooner.


Another advantage of a cash offer is you don’t have to worry about the property appraising.  When dealing with financed offers it is important to remember banks loan money based on two things:  the agreed sales price, or the appraised value, whichever is lower.  If a bidding war drives the asking price up, the house will still have to appraise at the higher price if the offer is made with financing.  If the appraisal comes in at a lower than agreed upon price, the seller has two options:  void the contract and start over or lower the contract price to the appraised value.  With a cash offer there is no appraisal and you can close much sooner.

REPAIRS

When reviewing an offer check for repair requirements and/or allowances in the contract.  Even a cash offer could have a stipulation in the offer stating the seller must perform repairs.  “As-is” contracts are the only exception.  As “as-is” contract is just that, the buyer will buy the property exactly how it sits with no repairs done by the seller.  Financed offers will sometimes be submitted without an call for repairs or allowances; BUT it is not only up to the buyer and seller.  The buyer’s lender will have requirements that the seller MUST perform before closing.

THE PROCESS OF ELIMINATING DOWN

When presented with multiple offers there is a process to eliminating some of them.  Each situation is different but this is a system Team Johnson advises to our sellers:
1. Throw out any and all offers that have conditions (home inspections, contingency of selling a home or refinancing another property, etc)
2. The next stage is to  throw out all offers that are at asking price or below
3. The next step is to eliminate any VA & FHA financed offers.  These types of loans take longer than the average, and sellers must pay for some of the buyer’s fees.
4. The last step is that of the offers remaining the all cash offers take priority.
In a bidding war, the highest offer is not necessarily the best offer for the home seller, unless it is an all cash offer with verifiable proof of funds, a quick close of escrow of 7 to 10 days or less and a hefty cash deposit.

Sellers are always looking to sell: A) at the highest possible price, b) with the least amount of inconvenience and c) in the quickest amount of time possible. If you are a home buyer and find yourself competing with other buyers for the same house, remembering some of these points ought to help you present your best offer. If you are a home seller and you find yourself receiving multiple offers for the purchase of your house, these points will be a good guide to assist you.  OR you can hire a team of professional and experienced contract negotiators!  TEAM JOHNSON is always here to help buyers and sellers through this type of process.  Give us a call 904-495-0146 or email us at teamjohnson@watsonrealtycorp.com