Offers on a home come in all different shapes and sizes. Some offers are good, while others can be perceived as insulting. Here are some tips to remember when you are reviewing an offer to purchase your property.
This can appear to be a given, but the sales price will be the starting point in determining your net profit.
The buyer’s financing is a section that the seller needs to carefully review. Are they using an FHA loan, VA loan, Conventional loan, or cash?
Traditionally the earnest money should be a minimum of 1 percent of the price that they are offering. For example, if they are offering $200,000 on your property, the earnest money should be set at $2,000 or higher.
Remember, the earnest money is the portion that they won’t get back if they back out without a valid reason. The more “skin” that they have in the game, the more likely the transaction is to be successful.
Does the buyer want a new survey on the property? The survey is an outline showing the property lines, any applicable easements that the city requires access to or any improvements such as a deck or pool. If no major improvements have been made a new survey might not be necessary. If the buyer does want a survey, the cost is $300 if you do not already have one, but it is something that can be negotiated as either the buyer or seller’s expense.
Home Service Plan
A home service plan is a line item that has become more common in real estate in recent years. This service provides the buyer with a warranty on the home for up to one year after purchase. The typical cost will range from $360 – $420 depending on the warranty company, and is normally a requested cost to the seller.
Essentially, how many more mortgage payments are you going to have to make before you sell your home? Closing dates should be set between 30 – 60 days from the contract date.
This is a big one to watch out for. The seller concessions is the section where a buyer is asking a seller to pay a portion (or all) of their closing costs. By law, the buyer can request up to 6 percent of the sales price to cover their closing costs. This will cut into the bottom line for you, the seller, however, as it changes the net price.
The option period is an extra that the buyer will pay the seller for to back out of the contract for any reason during a specific period of time. This is also the time that buyers will use to have inspections performed on the property and negotiate repairs. The typical option period is 10 days and the buyer will normally pay $100 for those 10 days regardless of closing. Once the option period has expired, the earnest money goes on the chopping block.
Check to see if there are any non-realty items addendums that accompany the offer. These give the buyer an opportunity to ask for items like furniture or appliances, things not physically attached to your home.
Earnest Money and Financing Letters
Also look for copies of earnest money and a proof that the buyer has been pre-approved for financing. An absence of either one of these items is taking a gamble on whether or not the house will close.
Get a net sheet from your real estate agent that shows your profit margin once all of the expenses come out and begin discussions from there on a counter offer. The net sheet will cover all of the above-mentioned items in relation to the proceeds you can expect to receive from the sale of your home.