On today’s market, some sellers struggle to get even a single offer – much less an offer from a qualified buyer, at a reasonable price, on terms they can live with. But just because the market is down doesn’t mean sellers are utterly powerless. Proactively asking prospective buyers the right questions can help put together the best possible deal, and stacks the decks in favor of it closing, as well – so here are those questions!
1. Where’s your proof of a loan or proof of funds available ? Real estate transactions fall out of escrow on today’s market more than ever (that just means that a contract is canceled sometime between the time buyer and seller sign it and the time it was supposed to close). This is a seller’s worst nightmare – to get your hopes up and your moving plans in motion then have to cancel it all because the deal falls through. And that’s just where the awful-ness begins; every seller fears pulling their home off the market in reliance on a contract that later implodes because of the reality that they might forgo other good buyers while your home is marked “pending.”
Deals often fall apart because the mortgage lender fails to approve the short sale, or the home appraises way below the seller’s bottom line. But another common deal-killer is when the buyer’s financing falls apart. While nothing is bullet-proof, smart sellers have their agents ask the buyers agent for robust proof that the buyer can actually do the deal.
If your home’s buyer plans to use mortgage financing, you should get a pre-qualification letter from a mortgage pro who has actually run the buyer’s credit, seen their down payment money and checked their income and assets – it’s not overkill for your agent to call the buyer’s mortgage contact and check on how recent and how strong (or tenuous) this approval is. (The more recent the better – down payment savings can be spent and even jobs can be lost between the time of the approval and the time of the offer, if many moons have passed.)
If the buyer ( Investors take note ) is using cash, the listing agent should insist on receiving a recent proof of funds, like a bank account statement, documenting that the buyer has the cash they will need to close on hand. For Investors the idea of flipping the home before you take title is not real. The Investors MUST BUY THE HOME AND HAVE CLEAR TITLE to the home before they can sell that home again.
2. Is there anything you would like? This question is all about personal property – the “stuff” that’s inside your home, from your furniture to your home electronics (not including the children – or the in-laws, if you have some in residence). If you have things that are in great condition, are difficult to move, are very well-suited or custom-made for the home or that you were planning to sell in the course of your move anyway, you might want to ask your home’s buyer if they are interested in them. Maybe you have a price in mind, or maybe you are willing to give it away for the convenience of not having to move it – I’ve even seen sellers who can’t meet a buyer’s counteroffer by reducing the price instead offer up a valuable item of property instead, sealing the deal that way.
If you do agree to leave some things behind – whether for a fee or for free, make sure you explain to the buyer in writing that you cannot offer a warranty on the item(s), and work with your broker or agent to ensure that the paperwork doesn’t run afoul of any lender guidelines.
3. For offers over the asking price: What’s your plan if it doesn’t appraise? Even on today’s market, a well-priced home in a great neighborhood can generate multiple offers, with the top offer usually exceeding the asking price. The problem is that if the recent sales in the area aren’t in that same price range as your amazing offer, your home could very well fail to appraise for the asking price (low appraisals are a very common problem these days – causing thousands of transactions to fall out of escrow). And the other problem is that some crafty buyers count on this, strategizing to make a sky-high offer to beat the others out, planning all the while to demand a price reduction when the property appraises low.
Before you accept an offer that is higher than you or your agent feels your home will realistically appraise for, ask the buyer what they plan to do if the property appraises below their offered price. Better yet, when it becomes clear that you’ll be receiving multiple offers, let all prospective buyers know that before you accept an over-asking offer, you will either (a) require that the winning buyer waive the appraisal contingency, and/or (b) require an agreement that the successful buyer will make up the difference between the appraised price and the purchase price, and proof that they have the cash on hand to do so. This is a surefire shenanigan minimizer, and will cause people to make only offers they will stand behind later. (Now, if the home appraises below the listing price, that’s a horse of a different color.)
4. Did you read the reports? Some savvy sellers who know their homes need a little work here and there (or a lot, as the case may be) take the smart step of having their home inspected or appraised in advance of even putting it on the market. If they can’t afford to do all the work indicated in the report, many will adjust the list price to account for needed repairs, some even going so far as to obtain repair estimates from local contractors and offer them up to prospective buyers in the home’s disclosure packets.
In their excitement to find a property that meets their needs, some buyers barely skim the reports and may not realize that the list price reflects a discount for the needed repairs. Best practices for sellers who have advance reports is to require buyers to acknowledge them (as by signing a receipt), and to even call out – in writing – the specific repairs for which the price is being discounted. Some listing agents in these situations even advise their sellers to insist on an as-is contract, so that the buyer has a crystal clear understanding that the seller cannot do any repairs.
That way, you don’t get two weeks into the transaction when the buyer understands the condition problems and (a) bails out of the deal, (b) asks for repairs or for more of a discount, or (c ) has their loan fall apart because a previous FHA appraisal came in low or their lender will not allow the home to be sold with your home’s particular “issues.”