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You shouldn’t only look at the number a buyer is offering up.
Key points
- In today’s housing market, it’s not uncommon to get multiple offers on a home.
- While you may be inclined to choose the highest bid, doing so could backfire on you.
There’s a reason it’s a great time to be selling a home. Right now, the residential real estate market sorely lacks inventory. As such, when homes hit the market, buyers tend to want to scoop them up. And often, that means landing in a bidding war, where multiple buyers duke it out for the same property.
As a seller, having multiple offers on a home is a good thing. But it’s important to choose the right one. And believe it or not, that doesn’t automatically mean opting for the highest number of the bunch.
Look at contingencies
Say you have two buyers who are interested in purchasing your home. One offers you $550,000 for your property, while the other offers you $565,000.
At first, the second offer might seem like a no-brainer. But what if that second offer is contingent on the buyer’s existing home being sold? At that point, you may have an issue.
To be clear, contingencies like that are quite common in the context of real estate offers. But if your $550,000 buyer doesn’t have a home sale contingency, that could make for a smoother transaction. If you’re looking to move quickly, for example, you won’t have to wait for that buyer’s home to sell before finalizing your own sale.
Consider favoring cash
Many buyers can’t afford to plunk down a pile of cash and purchase a home outright. But if you have one who can, and the offer is reasonable, then it’s worth considering.
Say you have a buyer offering $550,000 cash for your home, versus a buyer offering $565,000 who needs a mortgage. That cash transaction can close right away, whereas it could take several months for your other buyer’s mortgage to get finalized.
There’s also the risk that your other buyer’s mortgage could fall through, bringing you back to square one. And that’s not a good thing, because the longer your home sits on the market, the less negotiating power you end up with. So you may want to favor a cash transaction that’s more of a sure thing.
Make sure your buyer is pre-approved
Although a growing number of sellers are getting cash offers in today’s market, that may not be an option. In that case, if you have multiple buyers who need a mortgage, you may want to favor one who comes in with a pre-approval letter.
Though that letter isn’t the same thing as an official mortgage, it means a lender has vetted the buyer’s finances and has determined that should nothing change for the worse, that buyer will qualify to borrow enough money to purchase your home. That should give you more peace of mind as a seller.
Make the right call
You may list your home only to end up with two, three, or seven different buyers who would love nothing more than to take it off your hands. But rather than simply chase the highest offer, consider the above factors when making your decision.
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