I Received an Offer on My House – Now What?
Your Realtor has just informed you that he/she has received an offer on your property! Now what?! Of course, the first question that pops into your head is, “How much did they offer?” However, there are a few key items you should pay attention to on real estate offers: the price (naturally), closing costs, inspection contingency, closing date, earnest money deposit, commission, and a pre-approval letter.
Of course, the price is the first item to check. Is the amount within range of what you were hoping for? If it does, scan the offer for any references referring to closing costs. If the buyer is seeking help from you on the closing costs in a specific dollar amount, you need to subtract this from the price offered and you’ll get the true price being offered. The more closing costs they need covered, the higher the sales price should be.
A smart buyer will have an inspection contingency in the offer, which basically means the offer is only valid if the buyer is satisfied with the results from a professional inspection. If the buyer is not satisfied with the inspection results, they can legally walk away from the offer altogether. Check for two items under this contingency: the deadline in which they must conduct the inspection, and the deadline when they must inform you that they want specific items repaired or replaced on the property before the offer moves forward.
The buyer should have specified a closing date on which the closing will take place on or before. This date is likely 4-5 weeks from the date of the offer. If the buyer is not using a mortgage and is offering “all cash”, the closing date could be 1-2 weeks away.
An earnest money deposit, or “EMD”, is an amount of money submitted to the buyer’s broker from the buyer. This amount is typically 1-3% of the offered price and is more commonly referred to as a “good faith deposit”. It reassures the seller that the buyer won’t default on their offer and if they do, the EMD is released to the seller and seller’s Realtor. If everything goes smoothly and the offer turns into a closing, the money is applied to the purchase price of the property. Examine the amount of the buyer’s EMD and if you’re not satisfied, you can require more in a counteroffer.
The commission is also important to look at, as it effects your net profit from the sale of your house. Typically, your Realtor has set this amount in your listing agreement. This amount is used to cover both real estate agents in the event of a sale. If the buyer’s agent is asking for more than what your Realtor anticipated within your listing contract, make sure that it is your Realtor and not you that will be taking a cut. Of course, this is also something that can be negotiated down in a counteroffer.
A pre-approval letter from the buyer’s lender (assuming that the buyer is using a mortgage) should accompany the purchase agreement. This letter verifies that the buyer is pre-approved for the amount of money that he/she is offering. If an offer comes in without one, ask your Realtor to request one from the buyer’s agent. Don’t consider any offer until the buyer has shown that they have enough “purchase power”.
Have your Realtor review the offer with you – it would also be a good idea to have a lawyer look at it. The offer will likely have a time limit for you to respond to it – typically 48-72 hours. Use as much of this time as possible – make the buyer sweat it out. Keep in mind that almost every offer is made in anticipation that the seller will counteroffer, so counter with a price and a set of terms that will put you in a satisfactory profit range and will not give the buyer any unfair advantages. Give the buyer a 24-48 hour time limit to respond to your counteroffer. Good luck!