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Receiving an offer for a house is not the final step in a real estate transaction. In fact, it is the beginning of another stage in the process: the negotiations. After receiving a formal offer, the seller reviews it and then responds to the potential buyer. A counteroffer may follow then further negotiations until a deal satisfactory to both parties has been arranged.
It is important to do a careful evaluation of each offer. Here are five tips for evaluating a real estate offer:
1. Look Beyond the Basic Amount Offered. Obviously, the purchase price is the key piece of information in the offer. However, other offer elements may impact the total amount of money you'll receive in the transaction. For example, if the buyer asks that certain items not permanently installed in the home, such as curtains, appliances, and furniture, be included in the deal, you will lose the value of those items. Similarly, if the buyer insists that you pay for the home inspection, title search, other professional fees, or closing costs, the overall amount you receive will be reduced by those expenditures.
2. Consider the Timeline. The scheduling of a real estate transaction can be tricky for both parties because typically the buyer is also selling their current home just as the seller is purchasing their future home. These multiple, concurrent transactions make the overlapping scheduling difficult to coordinate. Since your preferred closing date may relate to specific events that are important to you (such as the beginning of the school year or the starting date for a new out-of-state job), it's important to review the closing date specified in the offer. Also review any contingencies included in the offer that could affect the timeline.
3. Assess the Seriousness of the Offer. You know a buyer is serious when they emphasize their financial commitment in one of the following ways: arranging for a pre-approved mortgage, offering a relatively large down payment, or including a relatively large earnest money deposit.
4. Review the Contingencies. In addition to looking at any financial repercussions and the possible impact on your timeline, review the overall impact of the contingencies included in the offer. For example, if the buyer asks for specialized inspections (e.g., roof inspection, inspection for termites and vermin, or inspection for earthquake or flood protection), the likelihood increases that a problem could be discovered, affecting the transaction. Similarly, if the buyer specifies that the sale is contingent on their home selling, the transaction could be derailed if their home fails to sell.
5. Consider Requested Seller Concessions. The potential buyer may make requests related to the condition of the house. For example, they may stipulate that you complete a planned interior renovation or replace the roof prior to the closing date. Obviously, there is a financial cost attached to any such project. In addition, this sort of work could affect the timeline of the transaction.
Assessing a house purchase offer requires a careful review of all aspects of the proposed contract. The time and effort expended are worthwhile. It is important to evaluate not only the basic purchase price but also the overall offer.
