Guide To Selling A Home – Negotiating a Contract
You put your house on the market and sooner or later, you’re going to get buyers interested enough to make an offer. But then, when the offer comes, it’s not entirely what you had expected. Perhaps the price is too low, or the offer is so stuffed with contingencies you fear that you will never reach closing. It’s not the end of the road, it’s actually just the beginning of a successful transaction.
Negotiations are a normal part of the home selling process. With a little give and take, you can soon reach a deal you’re happy with. Here’s how you get there.
A buyer makes an offer by filling out a document called one to four family residential contract, where the buyer puts all the terms they would like to include in the deal such as: the price, the down payment, who pays closing costs – the fees charged by mortgage lenders and third parties related to the purchase of your home, and lastly, any contingencies – such as a finance contingency if the buyer needs mortgage finance to proceed with the deal or a condition that the buyer sells their current home before they buy this one.
The first thing you need to address when you receive an offer is how strong the buyer is financially and how likely they are to close. A cash offer is always worth considering because a failure to obtain financing is the main reason why deals fail to close. You can take the all-cash offer, and it’s a safe bet that you’ll get your cash at the end of the day. But that cash may be considerably lower than your home’s market value; by 20 percent or more in some cases.
The best offer is a cash offer at full asking price with no contingencies and closing in two weeks. Unsurprisingly, these offers don’t come along very often. Often, the seller must choose between a discounted cash offer and a higher financed offer. Which one is better depends on a host of factors: whether the financed buyer is pre-approved, the contingencies required, how quickly the buyer can close and whether there are other sweeteners on the table, such as the buyer picking up your closing costs. View the offer holistically, as there’s a lot more to it than the price. Either way, don’t be pressured by your agent or anyone else into choosing the quick cash sale. You have the final say and should take the time to choose the offer you prefer.
If you like the offer, you can accept it by signing the offer document. At this point, the offer turns into a binding purchase agreement. The seller can’t back out, but the buyer have options out.
Usually, the original offer from the buyer is not acceptable. You can reject the offer outright or make adjustments to it – make a counteroffer.
You can change any of the terms suggested by the buyer and write in your own terms. You can:
- raise the offer price – you might also want to do as much as possible to make your property more appealing. Taking care of your own duties as a seller and getting a reliable real estate agent to handle the professional side of the transaction, will help you to sell your home quickly and for the right price.
- request a higher earnest money deposit
- remove some of the personal property on the list that the buyer is asking you to sell with the home
- bring forward the date by which the buyer has to satisfy acceptable contingencies – insist the buyer approves a home inspection within 10 days of the offer being accepted.
If the buyer’s offer is unacceptable and you need to negotiate, how will you negotiate to best hit the buyer’s buttons? Negotiate to raise the price, or keep the price lower but reduce the closing costs that you will be paying? The net dollar price of the two offers may be the same, but the buyer may find one deal more palatable than the other. This time, you might need to ask for your realtor’s advice.
The buyer can always counter your negotiating offer until you reach a deal. Thankfully, multiple counter offers do not usually happen. Most well-advised buyers and sellers reach an agreement after one or two rounds of negotiation.
What you should remember:
When you have rejected the first offer of the buyer, you cannot later go back and accept the original offer if you change your mind.
Expired offers – the offers which you or the buyer did not respond to. Those negotiations can only be reactivated when the buyer submits a fresh offer.
If you are selling your home in a buyer’s market, the buyer may have his/her pick of suitable homes in your area. Negotiating — even reasonably — may drive the buyer towards the second home on his list, and you may end up with no deal.
In a seller’s market with a shortage of suitable homes for sale, the buyer may be open to two or three rounds of counter-offers to secure their dream home. This is when you can probably push for your perfect deal.
Selling your home can be so stressful. When you hire a top real estate agent to help sell your home, you eliminate most of the stress.
You must select an experienced real estate agent. While all agents are licensed to perform the same function, only an agent with experience really knows what works and what doesn’t.