Across the Picket Fence - Dealing with OffersReturn to article list
Across the Picket Fence
Topics: Pricing | Contracts | Disclosure | Offers | Financing | Buyers | Agents | Buyer Issues
Dealing with Offers
Seller: We have two comparable offers on our house and are having a tough time deciding which one to choose. My husband prefers the couple who is local, but I think the man from Connecticut is our best bet because he's pre-approved. I'm hoping you can help us decide one way or the other.
Sorry, you'll have to make this call yourselves. It sounds as though you might be the more pragmatic one, while your husband may be reacting more to his sense of loyalty or friendship toward the local couple. It is important, of course, to consider whether the local couple will qualify for financing and other factors such as whether they have another property to sell first. Without a letter of pre-qualification, or better yet, pre-approval from a lender, you really are taking a chance.
Assuming, however, that they can convince you that obtaining financing is not a problem, other considerations might be closing dates, what type of neighbor the new owner(s) will be to your existing neighbors, or ____________. (Of course, if you still can't come to an agreement, flipping a coin may be the best way to keep peace in the house!)
Seller: What are the rules for accepting an offer? We have a showing scheduled tomorrow and one scheduled today. If the people today give us a full price offer, do we just cancel the appointment tomorrow?
Until you have signed a contract with a buyer, you are not obligated to anyone. We would encourage you, however, to be courteous and fair to the buyers involved. Usually buyers will give you a 24 hour time period to consider their offer. This gives you time to discuss their offer with your lawyer, and weigh the pros and cons -- and prepare a counter-offer if you desire. It also gives you time to show your home to other prospective buyers who might a) make you a better offer, or b) be more qualified to obtain financing. There is nothing wrong with making one buyer aware that you have another offer on your property, providing each party with the opportunity to make their best bid. In fact, not doing so may be unfair to the buyers involved, as each wants an equal chance to "win" the property. Read on for the "jilted buyer's" perspective on this issue...
Buyer: We made an offer on one of the houses advertised in your magazine, but the sellers accepted another offer without getting back to us first. This doesn't seem ethical -- and perhaps even illegal. Do you know what recourse - if any - we can take?
To answer your last question, speak with your lawyer regarding whether any legal matters were violated with your particular contract. If the seller (or you, for that matter) hadn't signed the offer/contract, you didn't have a legal contract. You simply had an offer on paper. As far as the ethics involved, while it would have been more courteous for the seller to give you the opportunity to improve your offer, they may have had other reasons for accepting the other party's offer without notifying you first. Perhaps they had reason to doubt that you would be able to get the financing, the offer followed a difficult negotiation, or your circumstances -- such as having to sell a house first, or not wanting to close right away -- were undesirable. Then again, the other party might have simply made them an offer substantially above yours, making the choice easy. The seller has the right to accept the best offer presented.
Seller: How do people deal with multiple offers? We have three parties interested, and all seem equally qualified. I've told them we have to wait to negotiate tomorrow when my husband is back in town, but I have no idea what to do then!
That's a nice problem to have! The fairest thing to do is let all buyers know that you have two other parties interested so that they have an opportunity to present their best offer. You might want to do a "sealed bid" arrangement where you give them a deadline to make their offer, and there is no further negotiation. This will avoid your being caught in the middle of a bidding war.
Seller: The problem I'm facing is that buyers are automatically offeringme 5-6% less than my asking price, arguing that since I don't have to pay a commission I should be able to sell it for that amount. It's priced very competitively now, and I can't afford to go any lower. Should I raise my price 6% to avoid this confusion?
No. If you raise your price, you'll lose your competitive edge. First, are you sure you're "competitively priced"? Have you had an appraisal done within the last year? If the answer is yes, then you should have no problem convincing your prospective buyers that the house is worth what you're asking. You may even want to show them the appraisal document to demonstrate that the asking price is fair.
Also, explain to your buyers that the agent's commission is typically added on to the seller's bottom line! Since you didn't have to inflate you price to cover this fee, yours is already at a bargain.
Seller: Would it make sense for us to offer a seller's rebate to allow for renovations the buyer wants to make? We have had a recent appraisal done ($250K), and would sell it for the appraisal amount, but give the buyer $16,000 back at closing to pay for an addition they wish to put on.
Mortgage lender: It used to be that banks/ mortgage companies would allow for decorating or maintenance expense seller rebates, but this has changed. In general, the guidelines are as follows: if the borrower is putting less than 10% down payment on the property, the bank will allow the seller to contribute up to 3% of the sale amount for closing costs only (renovation expenses and down payment amounts cannot be included as a closing cost). If the downpayment is greater than 10%, the bank will accept up to a 6% seller rebate - again, for closing costs only. So you really can't offer a specific rebate amount until you know more about the buyer's financing.
The other criteria that will affect you is this: the bank will deduct the amount of the rebate from the sales price that exceeds the amount allowed, which affects the amount of money they will lend the borrower. (A bank will lend 95% of the property's appraisal value OR the sale amount, whichever is lower.) In your case, if you are selling for $250K, the bank will allow a seller's concession of up to $15K (6%) if the borrower is putting at least 10% down and if this does not exceed the actual allowable closing costs.
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