When you’re selling your house, a bidding war is the best-case scenario. It means you have the upper hand, that several buyers are after your home, and that you’ll probably get even more cash than you’re asking for it.
The only thing standing in your way? That’d be choosing the right offer.
You see, the highest price isn’t always the best bid to bet on. In fact, it might even be the riskiest.
Want to make sure you choose the best (and safest) bet for your home sale? Here’s what you need to do:
Assess any contingencies.
Contingencies give the buyer an out, allowing them to back out of the transaction unscathed (and with their earnest money deposit in tow). They might include a contingency to allow for a home inspection, to ensure they get mortgage financing, or even to give them time to sell the house they’re currently living in.
While most buyers will include a contingency or two in their offers, not all will — especially in a bidding war. In most cases, the offer with the fewest contingencies is most likely to go through.
Look at the earnest money deposit and down payment.
Because buyers give up their earnest money deposit if they back out of the deal, a larger deposit shows serious interest in the home — and faith in their ability to purchase.
Similarly, a larger down payment is also a safe bet. It means the buyer is putting more of their hard-earned cash on the line for the property. This also lowers the risk for the lender, increasing the chances that their financing contingency goes through.
Pick one that’s preapproved.
A preapproved offer is one that comes with an initial stamp of approval from a mortgage lender. It means the lender has reviewed the buyer’s financial details and determined that they’re a good candidate for a loan. If the buyer has included a financing contingency in their offer, then preapproval is even more important.
Check out the closing date.
Always check out the proposed closing date that each buyer puts in their offer, and see how it aligns with your goals. Does it allow you enough time to find a new property and move? Is it super far out? If you’ve already found a new home, that would mean another month of dual mortgage payments.
If an offer you like has a closing date that doesn’t work, ask the buyer (or their agent) if they’re flexible. If they’re not, you can also ask about a lease-back, which lets you rent the home back from the new owner for a certain amount of time.
See what type of loan they have.
You can also look at the buyer’s mortgage loan type to gauge how likely they are to go through with the transaction. Conventional loans, for example, require the highest credit scores of all mortgages and are generally reserved for the most qualified buyers. This might mean a lower chance of the deal falling through than, for example, an FHA loan, which allows for credit scores in the 500s (generally a riskier and less financially able group of borrowers).
Ask your agent.
Finally, if you have a real estate agent helping you with your sale, get their input. What offer looks like the strongest? Which ones are in line with others they’ve seen in the neighborhood or on the market lately? Are there any you should worry about or steer clear of? Tap their expertise, and ask questions.
Don’t be afraid to push back.
The offers you receive aren’t set in stone. You can always negotiate with buyers and make counteroffers. If you’re not happy with the terms or bids you’re receiving, talk to your agent about pushing back. It’s normal for there to be a little back-and-forth during the offer stage of the transaction (and beyond).
Want to make sure you’re ready to buy that next property once the home does sell? Get in touch with Premier Nationwide Lending today to get preapproved.
Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 700 State Highway 121 Bypass, Suite 100, Lewisville, TX 75067 NTFN NMLS 75333.