Want to get the very most money for your home in this hot sellers’ market?
Most people don’t realize there is much more to selling a home than taking a few photos and throwing it on the MLS, especially if you want the very most for it. This is why I created my series, “Get the Most for Your House Even In a Hot Seller’s Market” - to help you and anyone you know maximize the profits from your biggest investment and not get “caught up in what other people are doing.”
Over the next few weeks, I’m sharing my four steps to getting the most money possible when selling your home, even when a home can sell itself right now. This is a must-read series, even if you aren’t selling a home anytime soon.
In this week’s article, we’ll talk terms and contingencies and the little known clauses in the contract that could keep you from getting to the closing table. I’ll also explain why a cash offer is not always the best offer to choose.
Price Is Just The Beginning of The Conversation
When you get an offer, it’s exciting to look at the price and start celebrating, but there’s so many other terms and considerations in an offer you receive on your home other than just price.
Price really is just the beginning of the conversation. Depending on the other terms in the contract (see below), the offer you accept could be full of hassles, conditions that open up negotiations after taking your home off the market, and even determine how quickly you need to be out of your home.
But, on the pricing front, one thing to pay most attention to is your NET price. The price listed on the purchase price line, might not be the actual purchase price. We have to look at things like closing costs credits, lawyer fees, and property taxes.
One thing I do for my clients at this stage, is provide a estimate seller’s net sheet so you know exactly what to expect as far as proceeds based on the contract in hand, inclusive of things like commissions, lawyer fees, property taxes and other closing costs,
Everyone wants a great price for their home, but it’s about more than just price. It’s also about you and your specific circumstances, needs, timelines and goals, called terms, that determines what offer is the very best offer for you, even if it’s not the highest offer you receive.
Equally As Important Are The Conditions and Terms of the Contract
Not only do you want the best price, but you also want the best conditions and terms that work for your particular situation and timeline. You also want to be sure to accept the offer that is most likely going to make it to possession day with the least amount of hassles or surprises.
All that is possible, but understanding the “hidden” terms in the contract is important. Here’s a run down of the most important terms to pay attention to and why they are equally as important as the price your buyer will pay:
Financing condition - This condition allows the buyer to firm up their financing with their lender within the condition period. This section of the purchase contract also includes whether the buyer is putting 20% or less down. I always like to confirm that the buyer is fully pre-approved and that they have the documentation to prove it. The shorter the financing condition, the better. If the buyer hasn’t included a financing condition in their offer, then they are implying the do not need financing to complete the sale. People often think of this as a cash offer and generally it is considered the most ideal, or most competitive type of offer. However, there are some caviets to this, especially in a hot market. More on this below.
The Deposit – This is the money that is held in trust by the seller’s agent’s brokerage until the closing date. It is applied to the purchase price of the home and the buyer down payment. It’s important to have a healthy deposit amount based on the sales price. Typically we want to see anywhere between 3-5% or more for a deposit. Anything less would make me question how serious they really are.. In a hot market the deposit should be expected within 24-36 hours after an offer is accepted as it cannot be completed until it is received.
Home Inspection - This is the condition that can make or break a deal after going under contract. Depending on what the inspector finds, it could even change the price you receive at settlement. So, we want to minimize the time the buyer has to conduct the inspection and provide a list of repairs.
Possession Date - We’ll discuss your ideal move-out timeline and suggest a preferred possession date that suits your ideal timeframe. Of course, I can’t guarantee that every buyer will be able to agree to the exact date you want and we certainly don’t want to scare off any potential buyers simply because of closing date, so this is something that I can say the sellers would prefer, if possible…a suggestion instead of a requirement.
Possession Date - We’ll discuss your ideal move-out timeline and suggest a preferred possession date that suits your ideal timeframe. Of course, I can’t guarantee that every buyer will be able to agree to the exact date you want and we certainly don’t want to scare off any potential buyers simply because of closing date, so this is something that I can say the sellers would prefer, if possible…a suggestion instead of a requirement.
Condition of the sale of the buyers home - In our current competitive market, this condition isn’t typical, BUT, oftentimes, buyers need to sell their home and just don’t disclose that or don’t include a condition. So, it’s important to know where the funds are coming from for the downpayment—even if they don't have the condition.
I always make sure I ask their agent if they have a home to sell and if they do, where are they in the process? Even though a buyer's agent isn't obligated to share this information I am inclined to get as much information as possible.
So, even if it’s not a condition listed in the contract, it’s still something we have to be vigilant about and ask the right questions to the right people to know what may happen down the line.
Why A Cash Offer Is Not Always The Best Offer To Choose
Cash offers are great to receive as long as they are the highest offer and there are no other terms (see above) that are deal-breakers. If the cash offer isn’t the highest or has other terms that don’t make it as favorable, then it’s worth looking at how the financed offers measure-up. Because of the extremely competitive nature of the current market, we’re seeing a lot of offers presented without financing conditions. Unfortunately, based on the number of these types of offers it is unlikely that every offer is in fact a fully cash offer. This means that a buyer IS using financing to purchase the home, they just aren’t including it as a condition of the sale and thus opening themselves up to a great deal of risk if their financing doesn’t work out. If the offer is unconditional (there isn’t an inspection condition or any other condition included) then there is no way for the buyer to void the contract should their financing fall through or they change their mind (which happens more often in a hot market). In that case, if they did walk away they would lose their deposit. This is why as a seller it's extremely important to protect yourself by way of a healthy deposit from the buyer.
Why A Cash Offer Is Not Always The Best Offer To Choose
Cash offers are great to receive as long as they are the highest offer and there are no other terms (see above) that are deal-breakers. If the cash offer isn’t the highest or has other terms that don’t make it as favorable, then it’s worth looking at how the financed offers measure-up. Because of the extremely competitive nature of the current market, we’re seeing a lot of offers presented without financing conditions. Unfortunately, based on the number of these types of offers it is unlikely that every offer is in fact a fully cash offer. This means that a buyer IS using financing to purchase the home, they just aren’t including it as a condition of the sale and thus opening themselves up to a great deal of risk if their financing doesn’t work out. If the offer is unconditional (there isn’t an inspection condition or any other condition included) then there is no way for the buyer to void the contract should their financing fall through or they change their mind (which happens more often in a hot market). In that case, if they did walk away they would lose their deposit. This is why as a seller it's extremely important to protect yourself by way of a healthy deposit from the buyer.
It’s All About You
I can’t reiterate enough, don’t focus solely on price, even in this seller market.
Yes, of course getting the best price is important but equally as important is getting to the settlement table and move-out day on YOUR terms.
It’s about both price AND terms. Both of these equally determine how your experience will be and defines the relationship you will have with the buyer between offer acceptance and settlement.
And, don’t worry, I’ll be with you every step of the way and make sure you get the best price and the most favorable terms that fit YOUR particular situation, goals, needs and timeline.
If you or anyone you know is thinking about buying a home in the next year, I’d love to help. Email me here and we’ll start with a conversion about why you are moving, where you are headed and when you want to be there.
I can’t reiterate enough, don’t focus solely on price, even in this seller market.
Yes, of course getting the best price is important but equally as important is getting to the settlement table and move-out day on YOUR terms.
It’s about both price AND terms. Both of these equally determine how your experience will be and defines the relationship you will have with the buyer between offer acceptance and settlement.
And, don’t worry, I’ll be with you every step of the way and make sure you get the best price and the most favorable terms that fit YOUR particular situation, goals, needs and timeline.
If you or anyone you know is thinking about buying a home in the next year, I’d love to help. Email me here and we’ll start with a conversion about why you are moving, where you are headed and when you want to be there.
