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Deciphering an Offer: The Savvy Seller’s FAQ

by | Feb 28, 2024 | Selling

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Selling a home is a major transaction, no matter if it’s your first time or your tenth time. It’s not just about the highest offer, but about securing the best deal. If you have multiple offers or are evaluating the strength of an offer, it’s crucial to look beyond the price tag and consider the nuances that impact your sale.

In this guide, we’ll discuss how to break an offer down into its key components. Combined with the offer price, these elements create the full offer “package”—the value of which can very greatly based on even a single term.

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Financial Strength of the Buyer

What is Proof of Funds/Pre-approval?

Even a seemingly perfect offer is worthless if the buyer can’t back it up financially. Though some buyers can offer all cash, the majority of buyers will take out at least some financing. If a buyer is looking to obtain a mortgage, they should reach out to their lender for pre-approval before submitting any offers. That way, sellers can see that they are making an offer that their lender is willing to back up.

While all-cash deals are less intricate, you’ll still want to be sure the buyer is offering cash that they actually have. In the case of an all-cash deal, a buyer should submit proof of funds with their offer—your agent will be able to help you decipher what proof is sufficient.

What is a Down Payment?

When obtaining a mortgage, buyers can often put down as little as 3% of the home price. However, a higher down payment makes an offer much stronger—it shows the seller that the buyer is more likely to have wiggle room if unexpected expenses arise. While many 3% down buyers still reach the closing table, if all other factors are the same, a higher down payment will win.

What is an Escrow Deposit?

The initial deposit made on your house is held in escrow until closing. No matter what the amount is, it ultimately goes toward the final cost—but is at risk of being forfeited if the buyer is in breach of contract. With this in mind, a higher initial deposit can signal a more serious buyer.

Conditions and Contingencies

What is an Inspection?

When buying a home, an inspection allows the buyer to request repairs—or back out entirely—based on issues that arise. No home is perfect, and an inspection report will highlight any imperfections. Every inspection will find something—the severity of issues (and buyer’s risk tolerance) will vary.

Though some buyers opt to waive the inspection completely, it’s not the norm. However, many buyers will state that they are only going to request repairs or credits if there are major issues that arise. This keeps sellers from having to repair every cracked tile or leaky faucet—small things add up!

As always, look to your agent for guidance on which requests should be honored.

What is an Appraisal?

If the buyer is financing with a mortgage, they’ll have to order a home appraisal. An appraisal is the lender’s way of determining how much the house is worth—if they decide the home is worth less than the offer price, they’ll only finance up to the appraised amount.

To strengthen their offer, a buyer can either waive appraisal completely (not common) or agree to meet an underappraisal at a certain amount. Either way, this is an extra expense the buyer will have to financially prepare for. By offering some type of appraisal match, buyers can help themselves stand out from the pack.

What is a Home Sale Contingency?

When a buyer has a home sale contingency, it means they can only purchase your home if their home sells first. This poses an added risk for sellers. In considering an offer with a home sale contingency, you’ll want to assess where the buyer is in their home sale—if they’re not even listed yet, your closing date will likely be farther out than usual.

Buyer Timeline vs. Your Timeline

What is the Time from Accepting an Offer to Closing?

Every offer includes an estimated closing date. If the buyer wants to close ASAP, you can expect about 45 days for a financed purchase and about 14 days if the buyer is paying all cash.

What is Closing Date Flexibility?

If you’re beholden to a timeline—like if you’re waiting for your next home to be move-in ready—a buyer who is willing to be flexible on their closing date is a huge perk. Flexibility varies from buyer to buyer, so it’s important to clarify a timeline for everyone’s sake.

What is a Rent-back or Use and Occupancy (U&O)?

If the seller won’t be ready to move by closing day (and the buyer is okay with this), there are a couple of options that allow the buyer to close before keys change hands. In the case of a rent-back, the buyer essentially becomes the seller’s “landlord” after closing—for an agreed upon price.

A less common—but extremely valuable—option is a U&O. A U&O is essentially the same as a rent-back except the seller gets to remain in the house for free. While this likely won’t be a buyer’s first choice, it’s a HUGE savings opportunity for the seller and can nudge a buyer’s offer into a more competitive bracket.

So…Which Offer Should I Take?

Considering all the above factors, it’s easy to see that the highest monetary offer might not end up netting you the most at closing. The offer package on the whole—from buyer strength to contingencies and closing date—is what should be taken into account, especially in a multiple offer situation.

To maximize your savings, be sure to combine all of the above tips with Trelora’s 1% listing fee.

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The information contained in this blog is for general information purposes only, and while believed to be accurate, Trelora assumes no legal responsibility for accuracy. Information provided within should not relied upon as legal advice. Please consult with your local advisors for independent information regarding availability and applicability in your market.