Best Offer Strategies for Home Sellers: The Safest Offer Types to Minimize Risk

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Today let’s discuss what kind of offer is more reliable when the offer prices are similar!

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01 Does the offer have contigency?

Once a contingency offer is accepted, it means that the buyer can withdraw according to the terms within a certain period of time and get the deposit back. This adds uncertainty to whether the house can be closed on time.

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02 Is the down payment sufficient?

Typically, buyers need to prepare a down payment of 20% of the house price.

However, when the market is hot, the appraisal price may not match the offer price. The bank can only approve a loan up to 80% of the appraisal price, and the buyer needs to make up the difference in cash.

In this case, even if the buyer signs a clean offer and removes the appraisal contingency, if the buyer only has a 20% down payment and no extra cash, the loan cannot be approved. One possibility is that the buyer needs extra time to raise the money, so the closing will be postponed. The buyer may even choose to directly lose the deposit and withdraw from the contract. No matter which of the above situations occurs, if the transaction cannot be closed on time, it will cause incalculable losses to the seller.

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03 Types of Loans

It may not be common in the Bay Area, but in places like Stockton and Scramento, which are about a 2-hour drive from the Bay Area, many buyers use FHA loans and must retain the contigency clause.

FHA loans can provide a very low down payment, but the FHA loan appraisal is very strict and has very high requirements for the house. We have encountered a situation where a buyer of an FHA loan entered into a contract, but because the lender made many requirements that the seller could not meet, the buyer had to withdraw from the contract even if he liked the house very much because the loan could not be approved.

A listing of Axis Team in Contra Costa County. The seller upgraded the flooring, interior and exterior paint, kitchen and bathroom cabinets before listing. The layout itself is also good, so there were many people looking at the house and inquiring about it after listing. When we were collecting offers, there were three offers with very similar prices. After communicating with all the lenders, we recommended the seller to choose an offer with a non-FHA loan. In the end, the buyer removed the contingency on time and closed on time.

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04 Closing time

Generally speaking, the faster the closing time, the lower the risk and the lower the seller’s holding cost. Such offers are most popular with sellers.

All-cash transactions can be closed in as fast as 3-5 days. Normal loan closing time is about 30 days, but now there are many lenders in the market that can even close in 15-20 days. There are also some special cases, such as the seller needs time to move out of the house, then whether the buyer provides rentback to the seller is also a consideration.

In addition, some sellers need to do a 1031 exchange to defer tax. A 1031 exchange requires the seller to identify the investment property to be purchased within 45 days of the closing of the investment property sold. In this case, the seller may prefer a buyer who is more flexible and can cooperate with the seller to achieve a long escrow close, so that the seller can have more time to find the next house.

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Of course, each case is different. Axis will provide sellers with professional advice based on the specific situation.