Wise Bread Picks
You’ve decided to sell your home. You’ve done your due diligence in preparing to put it on the market. You’ve meticulously staged it and strategically scheduled open houses. You’ve given the listing agent the green light to list it. And amazingly, your very first showing generates multiple offers. Sounds like a homeowner’s dream problem, right?
In today’s real estate climate, bidding wars are something more and more home sellers are having to navigate. While this is a great problem to have, multiple offers could muddy the waters and confuse the process of accepting an offer and closing the deal. Making the wrong choice could cost you time, stress, and thousands of dollars in lost profits.
Sifting through multiple competing offers that all seem similar can be a daunting process. However, with the right perspective and the ability to detect small differences in each offer, you can make the right decision and quickly close on your home. Here are four things that will help you sift through multiple offers and pick the best one. (See also: How to Sell Your Home in a Seller’s Market)
Understand the process
It’s important that you understand the homebuying process from a seller’s perspective. Sure, you’ve been through the process, but it was as a buyer and not a seller. Changing your perspective and understanding the potential roadblocks at each stage is crucial.
If you’re using an agent or broker to assist with the sale of your home, it’s still your responsibility to understand and actively participate in the process. While agents are great advisors and have a wealth of knowledge, the decision on which offer to select is ultimately yours. It’s also important to understand that the real estate agent is not an objective source of information. He or she benefits from your profit — which can work for or against you. Make sure to ask questions throughout the process. (See also: 6 Questions to Ask Before Selling Your House)
Prioritize your needs
Before listing your home, you should know what your priorities are for selling. While getting the most money may seem like it should be the ultimate end goal, the highest offer may not be the best offer. For example, if you’re looking to purchase another home once your current home is sold, the closing date becomes a much bigger priority. This is especially true if you’ve already found a home you want to make an offer on. Or, you may be trying to stave off foreclosing or avoid a short sale. In that case, the bottom line becomes extremely important.
Another example may be that you were offered your dream job in another location and you’ve decided to sell instead of renting your current place. The closing process becomes extremely important. Certain types of financing and mortgages can dramatically lengthen the time it takes to close, and they can also add additional contingencies that don’t accompany conventional loan financing.
Establishing non-negotiables is another thing you should do before putting your house on the market. Keep in mind though, at some point everything becomes negotiable. However, you do want to ensure your agent understands your needs and the things you are unwilling to compromise on. Having a list of priorities can help you eliminate certain offers immediately and will allow the best offers to organically rise to the surface. (See also: How to Sell a Home Without a Traditional Agent)
Create a uniform review process
Creating a process for reviewing and assessing offers will save you so much time and energy. Once you’ve established your priorities and non-negotiables, it’s easy to set parameters on the types of financing, time to close, and contingencies you’re willing to consider. It’s also smart to set a deadline for accepting offers. You can set a hard date cutoff when you reach a certain number of offers. Once you’ve gotten those things established, the process gets much easier and it’ll help you not feel overwhelmed by it all.
From there, you may want to establish criteria for assessing offers and a ranking system that will help you further narrow things down. For example, you may want to assign a lower priority rating or eliminate offers from those who are merely prequalified versus those who are pre-approved for finances. Other factors you may want to use to vet offers are loan types (conventional versus VA, FHA, etc.), request for assistance with closing costs, down payment (or lack of), and if the offer is contingent upon the sale of another property. A good rule of thumb when sifting through offers is: the fewer contingencies, the better. (See also: 8 Unexpected Costs of Selling a Home)
Do the math
While you’re in the process of categorizing, reviewing, and assessing offers, it’s important to calculate your total net profit for each serious offer. For example, if a potential buyer is offering the full asking price but has no down payment, is asking for $3,000 in closing costs, and requests a closing date three months from the date of contract, you definitely want to pause and do the math. If you have another buyer who offers $1,500 less than the asking price, but doesn’t request any closing costs and can close in 45 days, that deal is far more profitable than the first.
Ensuring that you do the math and find the offer that is not only the most profitable, but the most beneficial to you is key. Finding a buyer who is flexible enough to close quickly but allows you to stay in the house and pay them rent for two months while you find another place is so much more valuable than an extra $2,000 profit. Make sure you take time to pause and view each offer from multiple perspectives.