Most home sellers would rather have the luxury of choosing among many buyers than having their home languish on the market for months without a nibble.
Yet, having multiple offers for your home can be stressful and even overwhelming in a seller’s market, such as in Denver, which has a record low number of homes on the market.
Strategies for choosing the winning bid is the subject of this month’s conversation between Lane Hornung, CEO and founder of 8z Real Estate, and John Rebchook, of InsideRealEstateNews.com.
It is part of a series of Q&As on the fundamentals of home buying and selling.
John: Are we making it too complex? Should a homeowner just sell to the buyer offering the most money?
Lane: A lot of times, people think they should just accept the highest offer. That is not always the case.
John: Why not?
Lane: The goal is not just to get the home under contract at a high price, but to close it.
That said, the price, obviously, is very important.
But things like terms can be very important in reaching your goal.
John: What are some of the terms a home seller should consider?
Lane: A cash offer, for example, can be very attractive. One buyer may offer a slightly higher offer, but maybe the lender won’t let them close.
Maybe the home didn’t appraise.
In a strong seller’s market, like in Denver, Boulder or Northern California, a buyer might agree to waive the appraisal.
Or, put a cap or a floor on the appraisal. That is, if the appraisal comes up short, the buyer will kick in more money to make it work.
John: One of the biggest problems in today’s market is that people don’t want to sell their home and have no place to live. They don’t want to be homeless, so to speak.
What can be done to remedy that?
Lane: One idea is to put language in the sales contract that makes the closing date or possession flexible. A lot of 8zers are using contingencies like that. There might be a sales-leaseback period, so the seller can find another house during a certain period of time.
John: Should a seller get back-up offers?
Lane: I think so. Some buyers might try to renegotiate the deal after the inspection. If you don’t like what is happening, you can seamlessly move on to the next buyer, without losing much time.
John: Should a seller put much weight on personal letters or other methods that buyers increasingly are using to distinguish themselves from other bidders?
Lane: That is very subjective, but I don’t think those types of non-monetary considerations are without value.
It could be a sign that you are dealing with a motivated buyer and the process will likely be quite pleasant.
John: Do some sellers feel guilty about picking a winner?
Lane: Some do. But they shouldn’t. At 8z, many brokers use what we call the California-style method. That is, all of the bids are due on a certain day and time.
If the bids are due at 2 p.m. on Friday, for example, then many 8zers will create a spread sheet, so the broker and the seller can look at each offer objectively.
The important thing is to be fair to everyone who is interested in buying your home.
John: Any final thoughts, Lane?
Lane: Remember, being patient can mean getting $5,000, $10,000, $50,000 or even $100,000 or more when selling your home.
And keep your eye on the goal. Anyone can get you to first base. But you want to bring the deal home.