Step 4: Receive Offers & Negotiate Price
If your home is priced right, prepare yourself for multiple offers. If there’s a bidding war, awesome, because they are always in the seller’s favor.
A couple things affect how much you’ll be offered for the home including
- prices in your neighborhood, and
- whether the local market is a buyer’s or seller’s market.
Of course, your agent will be helping you throughout the negotiation, but here is some information to keep in mind anyway.
The buyer’s offer usually comes in the form of a purchase agreement. If you accept the offer, you sign the purchase agreement. If you don’t accept it, you’ll work with your agent to come up with a new purchase agreement (a counter offer) with new terms which will be given to the buyer to accept and sign, respond with a counter offer, or reject.
You’ll want to make sure the Buyers Real Estate Purchase Contract is reviewed thoroughly by you and your Real Estate Agent and that you pay attention to the following:
- purchase price and escrow deposits: it's usually up to the seller to choose a title company and an amount for the earnest money deposit
- pre-approved vs pre-qualified
- home inspection period
- any additional added terms - is the buyer asking for repairs/upgrades?
- financing commitment periods - when will the buyer get the financing necessary to purchase the home?
- closing dates
Pre-qualified vs Pre-approved
Almost anyone can get pre-qualified to purchase a home as long as they speak with a lender, providing verbal numbers regarding their credit, income and assets. This is NOT the same thing as being pre-approved.
When a buyer is pre-approved, it means they’re credit, income and asset worthiness have gone through an extensive review and the lender's conclusion has been provided in writing in a letter called the Buyer’s Pre-Approval Letter.
Pre-approved is always better than pre-qualified and if the buyers are taking out a mortgage to pay for the home, they will have to get pre-approved before they can purchase the home no matter what.
Asking for too many days in the home inspection period may indicate that the buyer is unsure about purchasing the property. Since the buyer has the right to back out of the deal for any reason during the home inspection, it might be too much of a risk to keep your home off the market for a wishy-washy buyer. Most home inspection periods are 15 days or less. If your buyer wants more than that, be cautious of signing the purchase agreement or ask to set the limit at 15 days because you may have a buyer on the fence about purchasing your home.
Asking for too many repairs and upgrades. It’s one thing to ask for a leak to be taken care of, a hole in the roof to be repaired, or a fence to be put up. But if your buyer is asking for a brand new fridge, washer/dryer and built-in shelving in the living listed by make and model number, don’t hesitate to counter with more reasonable accommodations. If the buyers reject your reasonable counter offer, don’t be discouraged. They probably would have been a pain to deal with anyway.
Making a Counter Offer
If you don’t like the buyers initial offer, don't be afraid to make a full-price counter offer if the price is competitive and warranted.
By the same token, avoid making a full-price counter offer if you know that your asking price is reaching. You may scare the buyer away and miss the opportunity to sell your home.
Accepting the Offer
Once you accept the buyer’s offer and sign the purchase agreement, you’ve created a legally binding contract between you and the buyer.
In other words, you’ve sold your home and it now belongs to the buyer, as long as everything goes smoothly with the home appraisal and the home inspection.
Don’t reveal anything about yourself or your financial situation that might give the buyer an upper hand. For example, if your purchase price is X but you’re willing to take 10,000 less, don’t tell the buyer that!
If X is how much your house is worth and it’s a reasonable asking price, don’t sell yourself short. You may not need the money now, but you never know what might come up in the future.
However, try to find out helpful information about the buyer. If you know the buyer really likes a particular piece of furniture or light fixture in your home that you’re willing to part with, you may be able get closer to your asking price if you throw them into the deal.
If you know the buyer has kids and they need to move in sooner than later so that their kids can be registered for school, you may be able to request fewer days in the home inspection period so that you can speed up the deal.
Remember that it's called an "asking price" for a reason. It's what you hope to sell the home for but it may not be what you actually get. Work with your agent to negotiate in a way that leaves you and the buyers happy and reassured.
Everyone involved wants to get the best deal and it is possible, as long as you’re willing to be flexible and follow your agent’s advice.