Imagine that you’ve been marketing your house and, suddenly, an offer comes in. What’s the best way to evaluate this offer and make sure it’s right for you?
Many people think that price alone is the determining factor. Though price is important, there are a lot of other elements in an offer to consider.
1. Earnest money. Earnest money is good faith money put up by the buyer so that you can comfortably take your house off the market while they do their due diligence and financing. The typical amount of an earnest money deposit is usually between $500 and $3,000, depending on the price of the home. Some buyers will try to get away with putting no earnest money down, but as a seller, you should make sure there is some reasonable amount attached to the offer. It prevents the buyer from changing their mind at the last minute and wasting your time.
2. Down payment. In general, the larger the down payment, the stronger the offer and the more certain you can be that it is going to get through financing well. In some areas and price ranges, you are just unable to get a big down payment, however. You might be dealing with a 0% VA, a 3.5% FHA, or a minimum 5% down conventional offer. If these are the case, you will need to evaluate the pre-approval to make sure it has been directly underwritten recently (no older than 60 days) by a reputable lender.
3. Commitment date. This is the date by which the buyer’s lender should have the loan finished and be ready to fund the deal. I see a lot of contracts that do not have a solid commitment date written in, which is a red flag for me. The deadline should be about 30 to 35 days after the contract is written.
4. Transfer date. The transfer date is the time that the house becomes the property of the buyer. That should be about one to three weeks after the commitment date because once the deal is certain to carry through, you will want sufficient time to prepare for your move, get your kids registered in school, set up utilities, etc.
5. Escape clause. We want to make sure that the buyer gets their inspection quickly. That way, if there is a problem with the inspection, you can know about it early and have time to correct it.
As you can see, there are a lot of elements that need to be evaluated beyond just the price one offers. If you have any questions about any of these items, please feel free to reach out to me. I hope to speak with you soon.