Okay, you’ve received an offer to buy your home (don’t forget to read the Do’s and Don’ts When You Receive An Offer). Maybe the offer to purchase is exactly what you hoped for, maybe it isn’t. Either way, when you receive an offer to buy your home, it’s time to calm down and evaluate it. Though it IS highly important, there is more to consider when you receive an offer than just price and there are more ways to respond to ANY offer to buy your home than just a simple yes or no.
What to consider when you receive an offer to buy your home
If you thought buying a home was a complicated process, get ready. Selling your home can be just as crazy, exciting, worrisome, thrilling, and maddening as buying it was.
Consider the initial price the buyers offer
Though highly important, price isn’t the only factor you should consider. If you’re selling into a home-buyer’s market, you’ll probably have to accept a price that is below your asking price unless you have a premium home with every amenity possible.
In a home-seller’s market, you can feel more confident sticking to your asking price and waiting for a buyer who agrees to pay it. Keep in mind that accepting a lower price usually lets you remain firm on other terms that matter to you, such as the timing of the closing or other contingencies of the deal.
Consider your personal situation
How badly do you need to sell your home this week, or this month? Have you already moved? Do you HAVE to report for a job 4 states away in two weeks? Are you paying on two mortgages already? How long can you keep that up without tapping into your emergency fund? Your own personal situation is a HUGE factor to consider when you receive any offer to buy your home.
Consider the buyer’s personal financial situation
As a seller, you should always favor buyers who have been pre-approved (not just pre-qualified) for a mortgage that’s at least as large as the selling price minus the down payment that the buyer intends to pay. You should also favor buyers who intend to put down at least 20% as a down payment, though anything above 10% is usually acceptable for most banks and mortgage companies. Why is it important that the buyer have enough cash for a substantial down payment? The combination of preapproval and a significant down payment (in cash) makes it more likely that the buyer will be able to complete the deal and buy your home.
How to respond to offers to buy your home
How you respond to an offer depends on the number of offers you have.
If you have a single offer to buy your home
You can accept or reject it outright, or make a counteroffer. Counteroffers are the most common seller response by far, especially in a weak housing market. No one wants to let anything even remotely reasonable slip away.
Your best bet is to make a formal, written counteroffer through your agent. In a typical counteroffer, the seller notes the terms of the buyer’s offer that he or she considers acceptable and strikes those that are unacceptable. Most counteroffers address both the price and any other terms of the deal such as the closing date or contingencies.
If you have multiple offers to buy your home (woo hoo!)
You should never negotiate with several buyers at the same time. It’s best to deal with the one buyer who offers the most appealing combination of price, terms, and financial stability. You might consider disclosing the terms of your best offer to all your bidders and set a deadline by which they can match or beat that offer. Bidding wars for your home are rare, but when they happen, you win!
The Purchase Agreement
Your and your potential buyer must agree on all the terms of the deal before you can consider it final. Once you have agreed on all the terms, one of your agents—usually the buyer’s agent—will prepare a formal purchase agreement that includes all the terms of the offer. Most states have (and require you to use) a boilerplate purchase agreement. In other states, a formal offer signed by both parties is sufficient. Any changes to the agreement that result from inspections or other issues should be documented in a written addendum to the agreement, signed by both parties.