4 Things Sellers Need To Know About Backup Offers
It’s no secret that most of the country is currently experiencing a strong seller’s market. Yet even in this competitive environment, almost 25% of all escrows fall through before closing. Home inspections, appraisal surprises, and loan approvals are just a few of the issues which can arise, causing the buyer to pull out of the deal. An essential component of any listing strategy should be a good backup offer, meaning that another buyer is willing to step in and close if escrow falls through. As you consider a backup offer, here are 4 things you need to know: 1. A Backup Offer Is Legally Binding - A backup offer is a fully executed offer, just like the original, so make sure the terms are acceptable. Typically, the buyer will include a contingency in the event they find another home. 2. Multiple Backup Offers - In a strong seller’s market, it is not unusual to accept multiple backup offers. Always clarify the position of each backup offer and whether you will continue to accept backup offers. 3. Leverage - Backup offers provide leverage during the escrow period as well as security for the seller. Use backup offers to discourage unreasonable requests for repairs or concessions during escrow. 4. Earnest Money - Backup offers do require the buyer to submit earnest money, just like the primary offer. This stays in an escrow account. Often this is smaller than a typical deposit with the condition to increase the amount if the offer becomes the primary one. Backup offers should be an important consideration in any home sale. Not only do they protect the seller if an escrow fails to close, but the buyer can also have another opportunity to close on a home they love.
Prepare Your Home For FHA Financing
When listing your home for sale, the most important consideration is how to get the most attention from potential buyers. It’s simple, the more buyers interested in your home the better. You have already considered how tobuild curb appeal and staging the home for marketing and home visits, but have you prepared your home for buyers who may wish to use FHA financing? Often, first time homebuyers take advantage of the great benefits of FHA financing, such as lower down payment requirements and easier qualifying. But it’s not just the borrower that has to qualify for FHA financing, the homedoes also. In order to appraise for FHA financing, the home must be livable and safe. A special appraiser will not only ensure the purchase price is comparable to other properties, but also verify the condition of the home. Here are some key aspects: Safety and Security – There must not be any hazards in the home. Everything from faulty wiring to loose carpet can be considered a safety issue. Structural Integrity – The inspector will look for cracks in the walls or sags in the floor that could indicate an issue. Health and Sanitation – All systems must be in good working order, such as: plumbing, heating, cooling, etc. Water and Sewer Systems – The home must have safe drinking water and the sewer and waste systems must be clear from any blockage or malfunctions. Pests – FHA financing will include a clear pest inspection. This means a termite inspection as well as being free from rodents and other damaging pests. As a seller, knowing what kinds of issues could disqualify an FHA loan makes your home attractive to a larger selection of potential buyers. Ensure these issues are corrected before listing which allows you to list as an FHA property.
How To Respond To A Lowball Offer
After all the hard work it takes to ready a home for sale, it can be so discouraging to find the first offer you get is a lowball offer. Regardless of the market, there are buyers who write offers 10%, 20%, even 30% below list price. While most of these offers are just “throw-aways,” it’s still possible to turn it into a successful sale. Before you do anything, take a deep breath and stay calm. There are many reasons why a buyer throws out a low offer. It could be they are getting bad advice from a family member or nervous first-time buyers afraid of leaving money on the table. It’s also possible that they are working with a new or poor real estate agent. The one thing you know is that they were interested enough in your home to write an offer, and they expect to negotiate. The next step is to send a counteroffer. Be respectful and thank them for the offer. If you do have room to negotiate, then offer to reduce your price to a reasonable level. If you have priced the home well to start with, then explain how you arrived at the list price and present any available comps. Remember to look at the other terms offered and be flexible where you can. For example, they may have asked for a longer escrow period, and you can accommodate their timetable. You may also want to ask that the home inspection is “information only” that removes the option of repairs. A lowball offer may take the wind out of your sails, but it doesn’t mean that there is no opportunity for moving forward. Working with your agent, send a reasonable counter offer back to the buyer and you may find that there is still a successful sale down the road.
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