How Strong IS That Offer, Seller?

The purchase price and variable terms of an offer are important, but the strength of the offer, the security, and the probability of closing should never be overlooked. That’s true In a sellers’ market with multiple offers to choose from and in a balanced or buyers’ market. Transactions that terminate result in wasted time and missed opportunities, so at the end of the day, the likelihood that the offer will transition from contract to closing is key. How do I help my seller clients assess the risk and reward of each offer?

Speak to each submitting agent.

A friendly conversation can often suss out the buyer’s motivation, how long they’ve been searching, how they feel about this particular property, and what features they are attracted to.  The conversation may help to distinguish between a buyer that wants A property and a buyer that wants THIS property.  

Review the pre-approval and speak to each lender.

Sure, buyers submit a pre-approval with their offer, but not all pre-approval letters are created equally.  I want to chat with each lender and hear what items they’ve personally reviewed and where the buyer is in the process.  Are they basing their letter on any information reported by the buyer, or have they fully reviewed all financials, the credit report, the buyer’s income?  Have they verified employment?  When did they complete these steps?  I also like to ask them about their process and communication.  The lender can make or break a real estate transaction, so sellers benefit from a knowledgeable, experienced, and communicative lender. 

Request proof of funds.

Most offers include some amount of buyer cash due at closing. The buyer’s down payment, earnest money, and closing costs amount to cash that they need to bring to the closing table, but aside from the earnest money deposit, most sellers aren’t aware of the amounts actually available and free for use. If any of that cash is not, in fact, cash and tied up in contingent accounts or scenarios, that should be known and weighed. I recommend that sellers request proof of any cash that the buyer needs to bring to closing.

Go over all contingencies.

The purchase and sale agreement offers plenty of options for buyers to terminate the contract without penalty.  Those contingencies are meant to protect buyers, and sellers should be aware of the contingencies waived and the contingencies left in place.  There’s no way to trap a buyer into a contract if they want to use a contingency to terminate (and you don’t want to), but you should know what their options are and the timeline for each.  You may  be able to counter an offer to negotiate reduced contingencies, shortened contingency timelines, and other items to help strengthen the offer overall. 

Essentially, plan and prepare.  A system for reviewing offers and assessing strengths and risks should always be discussed and in place long before an offer comes in.  It’s a huge decision.  Don’t wing it!