When the Best Price May Not Be the Best Offer
Estimated reading time: 3 minutes
Some sellers think a full-price offer is the best offer. However, in some cases it couldn’t be further from the truth and they could actually lose money after the completion of the sale. Many factors such as the type of financing the buyer is attempting to obtain, the possession date, seller concessions, and inspections can play a larger than expected role in the overall net profit (or loss) on the sale. If you want to know just how much these other items can affect the sale of your home, read on.
Although most offers include the standard financing and inspection contingencies in the purchase agreement, some buyers make an offer of the exact list price but then include various concessions and requests in a purchase agreement that favor them at the seller’s expense. These additions in the agreement, in effect, bring the “net offer price” down below what the buyer’s stated offer price is. Here are some of the most common financial concessions the buyer requests the seller to cover or pay outright:
- Complete certain repairs before closing.
- Include a credit paid to the buyer at closing for repairs. One example could be a “carpet allowance.”
- Include specific furniture, appliances, or personal items.
- Contribute money towards the buyer’s closing costs at closing.
- Pay discount points on the buyer’s loan to lower the mortgage interest rate for the buyer.
- Pay for additional inspections (e.g., pest inspection, radon testing) and remedy any findings.
- Pay for a property survey.
- Pay for a home warranty.
Other buyer requests may not have direct financial implications but could affect the closing date or cause you to lose precious time on the market:
- FHA, VA, USDA, or other non-conventional loans may be more stringent with inspections and loan commitments.
- A longer or shorter possession time than you have planned on.
- A contingency clause requiring the sale of the buyer’s current home before proceeding with the purchase.
Of course, when you receive an offer, I will review all terms, contingency clauses, and conditions. If any of the seller concessions or conditions listed here are in agreement that reduces the stated offer price, I will assist you in determining your projected net proceeds after closing so you can make the best-informed decision on each offer. I will also share the list-to-sale price ratios for other homes in your area so that you have a good understanding of what to expect when you receive an offer.
However, if you are not receiving the expected amount of interest or resulting offers, you may need another strategy to sell your home. This article may assist you in “How Understanding Supply & Demand Makes Pricing Your Home Easy.” Also, a review of how to improve curb appeal for your home or tips for making your home showings count may help you decide your next steps. In some cases, when the curb appeal and the staging of the interior are superior, buyers make higher offers and then it would be time to consider what conditions and contingencies are included in a seller’s offer.
What’s most important to me is that you have considered the many factors that contribute to the initial listing price and, after all the steps I have mentioned here, you’re now aware that the best offer may not be that initial list price. My goal is that you will be satisfied with the end result of your home sale after you walk away from the closing table.