512-743-5434
Kris Colquette
REALTOR®
Smart Source Realty
Kris Colquette's Guide To: FOR SALE BY OWNER
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Picking the Best Offer
In many of today's strong real estate markets, home sellers can expect to receive multiple offers for their home. Multiple offers are a classic example of economic realities because they appear when the supply of homes for sale is limited and the demand for good-condition homes is strong. Sellers love multiple offers because they push up home prices and create an opportunity to spark a bidding war. Knowing how to respond to multiple offers can help you get the best price and terms for the sale of your home.
How can I make sure my
home will attract multiple offers?
Hit the market
at the right price and, assuming your home is in good condition,
multiple offers should come in. "Sellers see [home prices] are going
higher, so they want to go a little higher. Sometimes it works and
sometimes it doesn't. You can end up having to wait for the market to
catch up with you," says Bob Stallings, broker/owner of RE/MAX Real
Estate Specialists in Long Beach, California.
TIP: Make sure your listing agreement states that your agent will put your home in the Multiple Listing Service (MLS) within 24 hours. Some agents will hold a home off the MLS for a day or two in hopes of selling it themselves or in-house. Putting the home in the MLS as soon as possible is in the seller's best interest because the home then will be exposed to a much larger number of potential buyers.
Do I have to accept the
offer with the highest price?
No. If you prefer a lower-priced offer, perhaps with a better qualified
buyer or more attractive terms, you can accept that offer instead. Or
you can give counteroffers to one or more of the buyers. Caution: If you
reject a full-priced offer, you may owe your agent a full commission
even if you don't sell your home.
Being greedy can back fire - REALTOR® Rae Wayne of The Bizzy Blondes team with RE/MAX Westside Properties in Culver City, California, says one seller instructed her to tell all the buyers' agents that offers would not be considered until the property had been on the market for one week, unless the offer was full-price or better. One agent asked to submit an offer right away, but the sellers, who were hoping for multiple offers, insisted on waiting until the appointed time. A week later, that agent was still the only one ready to submit an offer. "The seller said to me, 'What if we plan a party and nobody comes?' I said, 'That's the risk you took when you didn't want to look at this offer four days ago,'" she says. If you delay, anything can happen, including the buyers losing interest or offering a lower price.
My agent says I should
receive all my offers by fax, rather than having the buyers' agents
present the offers. Is that okay?
Some agents
recommend the fax-only option. "Very few agents who do a lot of business
will [present offers] anymore," says Carole Geronsin, a
Realtor-associate with Prudential California Realty in Anaheim Hills,
California. "Before, everyone would meet and the agents would tell all
about their buyers, then everyone would wait while the seller made a
decision." If there are multiple offers, the fax-only practice is a
time-saver for you and the agents. However, the jury is still out on
this practice. "I wonder [whether] the sellers are getting the full
picture of the buyers, unless there are cover letters telling them about
the buyers' qualifications. It's hard to really understand [the offers]
and make a clear decision," says Stallings. "I'm a strong believer that
it's best for both sides to have the offers presented, so the seller can
ask the buyers' agents questions about the buyers."
TIP: You might want to receive all the offers by fax, then have the top offers presented. Either way, you, as the seller, make the rules.
One of the buyer's agents
is from the same brokerage company as my agent. Should I give extra
consideration to this "in-house" offer?
No. All offers
should be evaluated equally based on the net price and terms. "We often
have offers on our own listings and the sellers don't pick ours. If my
own offer is marginal and the other offer is good, the last thing I want
is for my seller to be mad at me. I'm going to look for the best offer,"
says Judy Sheller, the other half of The Bizzy Blondes team.
TIP: Some brokerages give the seller a commission break for an in-house transaction. This concession is known as a "variable commission" or "listing broker advantage." It should be discussed in advance and disclosed through the MLS.
Can I counter more than
one offer?
Yes. However,
if you accidentally accept more than one offer you could be legally
obligated to sell your home to two buyers. For safety's sake, use a
standard counteroffer form that says the counteroffer isn't accepted
until it is signed by the buyer and subsequently accepted by you.
Can I back out of my
escrow with buyer A and accept a new higher offer from buyer B that my
agent just received?
Trying to back
out of an escrow is extremely unwise because an accepted purchase offer
is a legal contract and the buyer can take action to enforce it.
"Legally, once you have signed and agreed to the offer with buyer A, you
can't get out of it. Your only hope would be that the buyer does an
inspection and makes a bunch of requests. You flatly refuse everything
and perhaps the buyer walks away," says Wayne.
My home has been on the
market for four weeks, but I haven't received any offers. Is this
situation my agent's fault?
If you ignored
your agent's advice about pricing your home or making any repairs, it's
not really reasonable to blame the agent for the dearth of offers.
However, if the home is priced right and in good condition, you'll want
to have a frank conversation with your agent and take corrective action.
Never sign a listing agreement with a term of more than three months. As
a last resort, you can ask your agent's sales manager to help resolve
any complaints.
Six Seller-Financing
Pointers
Should you "carry back" a loan?
You're selling your home and the buyer wants you to finance part of the purchase price by "carrying back" a loan. Should you?
The answer depends on the anticipated ease of selling your home without the financing and your own financial situation. Seller financing is more common in slow housing markets when it's offered as an inducement for buyers. But it's also a viable option for sellers who prefer to receive a stream of payments over time instead of a lump sum in cash. If you're toying with the idea of offering seller financing, consider these six suggestions:
1. Think like a banker. Examine documents and reports indicating the buyer's ability and willingness to pay his or her debts. Verify the buyer's employment and other sources of income. Get a credit report. Ask for copies of bank statements and other financial documents. If the buyer is applying for additional financing from a mortgage lender, review a copy of the loan application.
2. Get a contingency in writing. The purchase contract should specify the amount, interest rate and term of the seller financing and include a clause allowing you to approve the buyer's financial situation before you go ahead with the loan.
3. Call your accountant and your attorney. Lending money to someone who is buying your home will affect your income tax situation. Interest earned on the loan is taxable income. The transaction can be treated as an "installment sale" for tax purposes, enabling you to spread your capital gain on the sale over the term of the carry-back loan. The loan documents should be drawn up by your attorney.
4. Set a shorter term. Seller-financed loans usually have relatively short terms -- perhaps 5 years or less. Some seller carry-backs are very short term bridge loans that cover a gap until the buyer sells a prior residence or obtains long-term financing. Balloon payments are common too.
5. Consider the collateral. Your loan to the buyer should be secured by the property, so you'll be able to foreclose and evict the buyer if he or she defaults on the loan. The home should have an appraised value equal to or higher than the purchase price, and the buyer's down payment should be at least 10 percent of the purchase price. Otherwise, you could end up foreclosing on a home that can't be sold to cover the outstanding encumbrances. A sizable down payment also reduces the likelihood of the buyer walking away from the mortgage obligations.
6. Hire a servicer. If you're willing to loan money to the buyer, but don't want to handle the paperwork or the payments, may help to offset capital gains you can retain a contract collection or loan servicing company. This company will compute the principal, interest and outstanding balance on the loan, send payment coupons to the buyer, deposit payments into your bank account, prepare year-end statements and provide other services. Some servicers will purchase the loan outright if you later decide to take the cash.
