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Ideas to Consider When You Evaluate Different Offers for Your Home

When you list your home to sell, it can be exciting when the purchase offers begin to arrive from potential buyers. How do you evaluate the different offers that you get, and choose one to accept, however? While it might seem simple enough to go with the highest bid, experts suggest that there are other criteria to take into consideration. Whether your home listing generates multiple purchase offers or just a lone, single offer, it's important to know what to look for.

Remember that net proceeds are more important than price

When you evaluate purchase offers, it's important to remember that the price that you're offered isn't necessarily the sum that you get to walk away with. You need to think about the expenses that get taken out of the price of your home, and the sum that you're left with in hand.

Seller concessions: In real estate transactions, a seller concession is a sum of money that the seller allows the buyer to keep to help cover the down payment and the closing costs. The actual sum that changes hands is negotiated upon. If a buyer asks for a seller concession, it's important to remember that it comes out of the purchase price that you get. For example, if one buyer offers you $105,000 for your home, but asks for a 6 percent seller concession, you are only left with $98,700 in the end. If another buyer offers only $100,000 but asks for no seller concession, you're left with all the money in hand. When you evaluate offers, it's important to pay attention to whether or not seller concessions are involved.

Bank repair expenses: When a homebuyer approaches a bank for a loan to cover the purchase of a home, the bank performs a home appraisal to determine whether the property is actually worth the price demanded. Often, banks require that certain repairs be carried out before they agree to financing the deal. It is the seller who spends on these repairs. It's something you need to take into account when a buyer offers to buy your home.

You'll need to understand the buyer's offer

When a buyer makes an offer on your home, it works out to your advantage to learn what their credit score and annual income are. Unfortunately, obtaining such information can be very hard. What you can do, however, is to gather information in the following areas.

Is the buyer pre-qualified or pre-approved: Before a buyer puts in an offer with a homeseller, they usually approach a bank for a mortgage. The bank evaluates their application, and either grants them pre-qualification or pre-approval. When a buyer comes in with only pre-qualification, they may possibly face hurdles actually getting a mortgage. It's a good idea to prefer buyers who are pre-approved. They tend to have fewer problems securing a mortgage than those who only have pre-qualifications.

What kind of mortgage does the buyer have: Banks offer buyers mortgages with different kinds of options. There are mortgage options that allow buyers to come in with zero down payment, and ones that require a down payment; buyers may come in with an FHA home loan or a VA home loan. It's important to learn about these alternatives and arrive at a decision that works for you.

Is the buyer's timing convenient?

Once a buyer applies to a lender for a mortgage, the lender begins the process of collecting the documents needed from the applicant, and processing them. Once they are satisfied that the applicant is able to qualify, they issue a formal mortgage commitment, with a target date that is usually three weeks away. If a potential buyer has a formal mortgage commitment whose target date is much farther away, it may not work for you. It's important to pay attention.

If you plan to buy a new home immediately after selling your current home, you'll need to make sure that you consider the target closing date for the purchase offer. It will need to align with the closing date for the new home that you hope to buy. It can't be too far in the future. You would do well to consider purchase offers that have convenient target closing dates.

Are there contingencies included in the purchase offer?

Purchase offers often come in with contingencies - conditions upon which the offers to buy your home are based.

Inspections: Most buyers who put in offers to buy homes make them contingent upon the ability of those homes to pass different inspections -- a home inspection, a structural inspection, a pest inspection, and a well water inspection, among others. Should your home not do well in any one of these inspections, those buyers could withdraw their offers. A buyer's offer that isn't contingent upon such inspections can be far more desirable than one that is. Alternatively, you could have pre-listing home inspections done on your home, yourself. Whatever home inspections your home fails, you'll know to reject purchase offers that are contingent upon those inspections.

A home sale contingency: Sometimes, buyers insert sale contingencies in their offers to buy. This means that they have a home to sell, and can only buy your home once their sale goes through and they have money in hand. Even when such a buyer does agree to buy your home, there's no guarantee that they actually will, because their own home may not sell in time. Such buyers tend to be less desirable than buyers who don't bring in sale contingency clauses.

Conclusion

While you may be happy for every purchase offer that you receive on your home, you need to remember that it's important to evaluate them to see how much sense they make for you. If a potential buyer's offer is complicated by requirements to do with new home purchases, contingencies, or late closing dates, their offer may no longer be as attractive as they originally appeared. When you familiarize yourself with the different complications that a purchase offer may come with, you'll likely find the going much easier.

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