When you list your home to sell, it can be exciting when purchase offers arrive from potential buyers. How do you evaluate the offers you receive and choose one to accept? While it might seem simple enough to go with the highest bid, it's essential to know how to evaluate purchase offers.

Remember that net proceeds are more important than price.

When evaluating purchase offers, it's important to remember that the purchase price differs from your net sale proceeds. Consider the costs that will need to be covered.

Seller concessions: In real estate transactions, a seller concession is a sum of money the Seller contributes to the Buyer's costs, which can cover almost any of a variety of expenses incurred when purchasing a home. The amount of the Seller concession, if any, is negotiated in the purchase contract. If a buyer asks for a seller concession, it's important to remember that amount is deducted from the purchase price. For example, if one Buyer offers you $105,000 for your home but asks for a 6 percent seller concession, you are only left with $98,700 in the end. If another buyer offers only $100,000 but asks for no seller concession, you're left with all the money in hand. When evaluating offers, it's important to pay attention to whether or not seller concessions are involved.

Home Owner Association Fees: If you are selling a home in a homeowner's association, there will be fees involved when the property changes ownership. These fees can vary greatly from one HOA to the next. Ensure you understand which fees the Buyer has offered to pay and which fees will be deducted from your bottom line.  

You'll need to understand the Buyer's offer.

When a buyer makes an offer on your home, it would be great to know their credit score and annual income. While you won't be getting that information, you will receive the next best thing: their Pre-Qualification Form.

How does the Buyer intend to make the purchase: If they are a cash Buyer, they must submit proof of available funds. It is ALWAYS advisable to verify this proof of funds with the issuing financial institution. You may not be able to get detailed information, just enough to confirm the proof is legitimate. If they are financing the purchase, are they pre-qualified or pre-approved?

Is the Buyer pre-qualified or pre-approved: Before a buyer submits a purchase offer on a financed transaction, they approach a lender for a mortgage. The Lender evaluates their application and either grants them pre-qualification or pre-approval. Different Lenders may have different processes, and it is ALWAYS a good idea to reach out to the Lender regarding the form submitted with the offer to verify its authenticity. 

What kind of mortgage does the Buyer have: Lenders offer buyers mortgages with different options. There are a variety of loan programs with varying requirements for each. Some loan types have restrictions on property characteristics such as zoning and use, the property's condition, the type of road on which the property sits, and even how many houses share a septic tank. It's important to learn about the different types of loan programs, any restrictions, and if they may affect your ability to accept offers with certain types of Buyer financing.

Is the Buyer's timing convenient?

Once a buyer applies to a lender for a mortgage, the Lender begins collecting the documents needed from the applicant and processing them. It's a good idea to see where the Buyer is in that process and if the closing date suggested gives an appropriate amount of time. 

Are you buying another home? You'll need to consider if the timing of the offer coincides with your new purchase. Staying after the sale closes is called post-possession of the property, and it can often be negotiated with the Buyer, depending on their circumstances. Keep in mind that some types of financing have a requirement for how soon after closing the Buyer needs to occupy the home depending on the loan type.

Are there contingencies included in the purchase offer?

Purchase offers often come with contingencies - conditions that must be met before the purchase can be finalized.

Inspections: Most buyers who put in offers to buy homes make them contingent upon the outcome of the Inspection Period. Buyers can have a variety of inspections performed on the house during this time, and those buyers could withdraw their offers depending on any issues revealed during the inspection. A buyer's offer that isn't contingent upon such inspections can be more desirable. Alternatively, you could have pre-listing home inspections done on your home to ensure your disclosures are complete and there is little room for surprises. 

A home sale contingency: Sometimes, a Buyer's ability to purchase your home is contingent upon the sale of their home. If that is the case, you will receive information about their property's listing. If the Buyer's property is already under contract, you will also receive a copy of that contract. As always, verifying documentation and evaluating whether accepting an offer with a contingency is the best course of action is a good idea.

Conclusion

While you may be happy with every purchase offer you receive on your home, you need to remember that evaluating them is important to see how much sense they make for you. If a potential Buyer's offer is complicated by concessions, contingencies, or inconvenient closing dates, their offer may no longer be as attractive as it originally appeared. When you familiarize yourself with the different complications a purchase offer may have, you'll likely find the going much easier. 

A knowledgeable and experienced REALTOR will be able to guide you through the process and answer all your questions to help you make the best decision for your situation.