How to manage and reply to offers when selling your home yourself

If your reading this then you are savvy enough to understand the selling process to sell your home yourself or you have engaged a realtor to help you sell your home.  We are going to do a deep dive into the managing and replying to offers.  Before we begin, I want to remind you, if you are in a state that requires a property condition disclosure, make sure the buyer has a copy of it before negotiating. This is required and when not provided prior to can lead to changes from the buyer after an agreement is made.

Lets start by agreeing that an offer to buy your home is not someone verbally saying I want to buy your home.  There is a lot more needed to make an offer.  It is why I am strict, all offers must be in writing. This way you can properly evaluate the strength of an offer.  And this goes for anyone, from the richest man or woman in the world, to a super famous celebrity, to the average person, nothing is serious until it is received in writing.

An offer should contain the following:

  1. First and last names of the buyer or buyers.
  2. The buyers address.
  3. The buyer or realtors contact information.
  4. The address of the property.
  5. The offer amount, how much they want to buy the home for.
  6. How much of a total down payment or if it will be all cash.
  7. How much is being put down upon signing the contract. This is called the good faith deposit or earnest money deposit.
  8. If they are getting a mortgage, how much it will be.
  9. What date roughly the buyers want to close. They can write asap.
  10. Any special terms like, as is, something needs to be fixed repaired or replaced. Or can include things that will be excluded, like the removal of a rotting tree, a broken fence.

There are documents that should be included:

  1. If the buyer is obtaining a mortgage, then a pre approval that should be dated no later than 90 days ago. If it is ask them to get it updated. Things happen, people lose jobs, pay things late, charge more things and then don’t qualify any more.
  2. If buying all cash, where is the cash coming from? If the money is in the bank, a bank statement, and they can black out the account number if they want. If a home is being sold to purchase yours then you want that home to be in contract already.  You don’t want to assume that a buyer is able to sell and get whatever they tell you they can.

So now that we understand exactly what an offer is, it is important to make sure all interested provide this information to you in writing, either by text or email.

How to evaluate an offer? Of course we all like to think highest offer wins, but that does not always mean that is the best offer.  For example, if you are in a rush to sell, you might take an offer for all cash that is $40,000 less than one with a mortgage. Or you may accept an offer that is $30,000 lower, because the higher offer has 5% down, but the lower offer have 40% down.  This can be important if you are worried the offers that are higher than your asking price will not appraise thus making getting a mortgage difficult unless the buyer can come up with more money out of pocket.  So the highest offer does not always equal best offer.

The way to evaluate an offer is first compare it to the pre approval.  Is the purchase price on the pre approval less than what you agreed to? This can hint to the buyer not having enough funds to put close.  Is the low amount on the pre approval lower than what the buyer stated they will obtain? This will indicate if they be approved for the mortgage.  I also google the lender that issued the pre approval to read reviews and see if there have been any discipline actions by Federal or State regulators.

Staying with the pre approval I do suggest, if you decide this offer is worth accepting or countering, you call the loan officer on the pre approval. Tell them you are the seller, give them the purchase price and loan amount and ask if this person will be able to close.  A real estate professional will have several more pointed technical questions to evaluate the veracity of the pre approval.

If buying all cash, and a bank statement was provided, make sure they have enough to buy the home. And make sure you are mindful of the dates in the bank statement  A bank statement should never be more than a month old.

Next look at the down payment being given when signing contracts.  Is it enough money that they buyer will be upset if they lost this money.  For example, the down payment is $500 when signing contracts.  This is a buyer that if they do not bother to apply for a mortgage or do their part to close, they don’t care about losing $500.  You want at least half the down payment to be paid when signing contracts.  If all cash then at least 5 to 10 percent of the purchase price.

Next look at when the buyers want to close.  A lot of times this can be negotiated. At a time like when I am writing this, inventory is very low, it is common for a seller to want to stay in the home for more than a few months in order to find a place to live.  Nonetheless, be mindful of this date.

Lastly I would look to see if there is anything special about the offers, meaning, does one say I will waive the home inspection?  Does one want you to replace the roof??  What can you live with and what do you want to respond no to?

How to respond?  For all offers that are just too far apart from where you are, do not counter offer.  Counter offering is generally revealing what your bottomline is or at least closer to it than the asking price.  You don’t want to reveal that unless your bottomline is the asking price.  So for offers that are too low simply reply, “Thank you for the offer but we are simply too far apart  for me to counter offer you.”  You may be pressed to ask for any counter.  Just refer them back to the asking price.  If the offer is perfect then of course by all means let the buyers know you accepted their offer and its time to move to the next phase, home inspection and contract of sale.  If the offer is low but not way off you can do one of two things.  You can say, “My counter offer is $Blank.” Or “My counter offer is $Blank, because 1 Main St, 3 Delaware, and 4 First St all sold for that amount.”

What to do with multiple offers? The truth is that as a seller, you want at least two offers in order to pit the buyers against each other and drive up the purchase price.  So multiple offers are evaluated the same as above.

You should create a rating system.  Rate each offer. Then for the top two counter offer them.  Take their response and see how the third and forth highest rated offer respond. Some believe the correct strategy is to simply ask for the highest and best.  The problem is that most buyers go over budget when buying a home.  And by making the calls they are part of the race.  They have a chance.  And if another $10K will make it work a lot of times they will.  But with a highest and best by a certain day and time strategy you lose the effect of calling others and seeing how high they will go.  I have done both strategies over the years and determined me calling individually the top 4 or 5 bidders has resulted in a much higher sold price than the times when I told all the parties just send me your best offer and the highest wins.

It is also important to keep the door open with everyone that made an offer. Real estate sales is not like selling a basketball or any other thing purchased on a whim.  Buying a home is a big deal, and things happen. The buyer you selected may get fired.  Have a car accident.  You have no idea until the day you get a check and give the keys to someone.  So here is what I tell everyone and this can be done by email or text so it does not require a personal call, “I have decided to go with a different buyer.  But in real estate you never know what can happen. I would like to leave the door open so that I can reach out to you should the buyer I selected not work out, and see if you are still interested. Thank you.”

After you accept an offer you need an attorney or title company, depends where you are located.