When looking to sell your home, it might be easy to focus on the dollar signs. Everyone wants to walk away with at much money as possible after going through the entire processes setting an asking price, staging the house, promoting the listing, preparing for open houses...and the list goes on. To be rewarded for going through these necessary steps, you might need to look at these five things before taking the highest offer you receive.
1. Earnest money deposit: The earnest money deposit (EMD) is the sum of cash the buyer is offering when the sales agreement is signed to show they are serious about buying your home. It goes towards their down payment at closing. Standard EMDs are generally 1% - 3% of the cost of the home. If a buyer changes their mind for no reason, the seller typically keeps the EMD. So, the more money they throw down in earnest, the stronger their offer is and the closer you are to actually selling your house.
2. Contingencies: Does the offer come with contingencies of one kind or another? Many offers are contingent on some set of provisions that must be met before the transaction is final. If these things aren't met, the buyer can walk away with their EMD. Common contingencies include Home Inspections, Appraisals, Financing, Sale of Current Home and Title. To read more about these contingencies, view my previous blog post here. Simply put, the fewer contingencies, the more likely your house will be sold in a timely fashion.
3. Down payment: Again, this consideration is linked to the strength of the buyer's offer. Depending on the mortgage type, a buyer must make a down payment. The larger the down payment, the more serious the offer for your house. It's very common for the downpayment to be linked to the to the type of home loan the buyer is using. But as a seller, your main concern should be closing the transaction. For that to happen, the buyer's mortgage must be approved.
According to the National Association of Realtors, the average down payment is 10%. A larger downpayment signals a greater purchase ability of the buyer. If an appraisal is done during the process and it comes back higher than your contract's sale price, the buyer with the higher down payment would be in a better position to cover the difference. And doing so gets you closer to selling your home.
4. All-cash offer: Money talks. The more a buyer throws down, the more likely they are to be approved for a loan. This is why all-cash offers are ideal for both buyers and sellers. In this scenario, the buyer doesn't need to fulfill an appraisal contingency or a financing contingency since there is no mortgage. Again, fewer contingencies in the contract mean fewer ways for the deal to fall through.
5. Closing date: Typically, the time between accepting an offer and closing is between 30 and 60 days, with the average being 42 days according to a report from Ellie Mae. Whether you want a slow or quick closing depends on your circumstances. If you're waiting for the cash from your sale to purchase a new home, you might opt for a longer closing period near 60 days. Or, if you've already purchased a new home, you might want this to happen as soon as possible.
These 5 considerations can have a heavy impact beyond the final dollar amount and should receive extra attention before simply accepting the highest offer. Remember, an offer doesn't become a contract until agreed upon and signed by both parties. That's your ultimate goal. Because at that point, the clock starts ticking for any of the buyer's contingencies and you're nearing the finish line of selling your current house so you can focus on enjoying your new home.