Buying a new home often involves selling your current one. And in this market, that likely means you’ll receive multiple offers from potential buyers. So, if you receive multiple offers on a house, shouldn’t you just choose the highest one? Not necessarily. Mortgages can never take the easy way, can they? That’s where we come in. Let’s dive into all the key factors to consider when choosing the best offer on a house.
7 factors to consider when you receive multiple offers on a house.
- How many contingency clauses are there?
- How is the buyer planning to pay for it?
- If the buyer is paying via mortgage, what type?
- Is the buyer pre-approved?
- Can the buyer cover the difference if the appraisal comes back low?
- Can the buyer accommodate your move-out schedule?
- How much earnest money did the buyer put down?
How many contingency clauses are there?
Contingency clauses are conditions that let buyers back out of the deal if they aren’t met. Since these conditions are intended to lower the buyer’s risk, as a seller you’ll generally want to favor offers with fewer contingencies. Some common contingency clauses to look for include:
- Buyer has to sell their current home before buying yours
- Buyer can walk away if the appraisal comes back lower than expected
- Buyer can request necessary home repairs to be taken care of before purchasing
How is the buyer planning to pay for it?
If your buyer is offering to pay in cash, this could be an incentive for you to favor that offer over one that hinges on a mortgage. Cash offers save you (and the buyer) a lot of time and paperwork. On the other hand, cash offers typically won’t be the highest you receive. If security is a priority for you though, it might still be the best fit. Keep in mind that you may not receive any cash offers, as the average buyer simply doesn’t have that much money readily available.
If the buyer is paying via mortgage, what type?
While cash is great, most offers on your home will likely entail a mortgage. The heavy lifting for their home loan falls largely on the buyer, but some loan types may be easier for you to deal with than others. For example, government-backed mortgages like FHA and USDA loans could potentially take longer to process than Conventional loans. Not ideal if you’re in a hurry to move out.
Pro-Tip: Learn more about the different types of mortgages your buyers may have here.
Is the buyer pre-approved?
In a competitive market, a pre-approval letter from your buyer is more of a need than a want. Pre-approval essentially lets you know that if you accept their offer, the buyer has financing lined up. But if everyone is pre-approved, how does it help you make your decision? This is where your own research comes in. In addition to how much the buyer is pre-approved for, you should also look into who they’re pre-approved with. Not all mortgage lenders are created equal (we would know).
Can the buyer cover the difference if the appraisal comes back low?
Gap happens. If the appraisal (an objective estimate of the home’s value in the current market) comes back lower than the offer you’re considering, that difference typically won’t be covered by the buyer’s mortgage. In other words, before you accept an offer with an appraisal gap, make sure the buyer can make up the difference.
Pro-Tip: If you find yourself on the other side of an appraisal gap, try these strategies to close it.
Can the buyer accommodate your move-out schedule?
Whether you’re looking to move out ASAP or you need more time before handing over the keys, an offer that works with your schedule will make the process that much easier. Just remember that, like most decisions in life, the date you and your buyer both agree on will probably entail some compromise. After all, your schedule isn’t the only one in flux.
How much earnest money did the buyer put down?
A buyer’s earnest money deposit is typically 1-3% of the purchase price. In a competitive market, you might receive offers with higher deposits to sweeten the deal. The purpose of earnest money is to give you, the seller, confidence in the buyer’s ability to meet the conditions of the purchase agreement. This generally means that more earnest money is better, as you get to walk away with that amount even if the deal doesn’t go through.
Any other tips for handling multiple offers on a house?
This isn’t an exhaustive list of factors to consider when selling your home, but it should help you narrow down your priorities to choose the offer that best meets your needs. In some cases, you may also want to ask:
- Is the buyer willing to pay for/handle repair requests?
- Is the buyer willing to pay your closing costs?
- Why is the buyer interested in your house? If your home has a lot of sentimental value, it may be important to know it’s being passed on to someone who will care for it as much as you do. Just be prepared for most honest answers to be “I need a place to live” and “it’s in my budget.”
In the midst of answering all these questions, don’t forget to pause, breathe, and remind yourself that out of multiple offers on a house, the best is ultimately the one you feel most comfortable with. You’ve got this!
Choosing the best offer on your house might be more complicated than you think. We’re here to uncomplicate it.