In Real Estate All Offers Are Not Made the Same

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When you are buying or selling a property, when an offer is made, it is an exciting time! What many first time home buyers and sellers or For Sale by Owner sellers don’t know is what they don’t know about offers. Many think an offer is an offer, but  because all offers are not made the same, and I don’t mean just the value of the offer, it is important, for both buyers and sellers, to know how to evaluate offers in order to choose the right one or to make a good one.

    1. Cash is King – In general, in life, cash is king. In real estate you could also say that cash is the king, the emperor, the end all be all. A cash buyer can just buy a property. There is no bank involved which can impose conditions that can make it difficult to close. Of course a cash buyer still has a right to an inspection and to make demands, but this is wholly different from dealing with a lending institution. Cash deals are the surest thing in real estate, and tend to close very quickly.If you get a cash offer, and the difference between what you will net in your pocket and a financed offer is minimal, take it! Negotiate with the buyer to see if you can get more than what you want, but if you can live with the difference, take it!If you are buying then realize the potential advantage you have by paying cash. A seller’s Realtor® will always recommend a cash offer over others because it simplifies the process. However, don’t think that because you have the cash in hand that a seller will settle for a significant amount less. Your offer still has to be reasonable. Cash is very attractive but an exceedingly low offer can make it quite ugly to a seller. Offer wisely.
    2. Down Payments – If you don’t get any cash offers what can set offers apart is the amount of the down payment and/or the type of financing (discussed below). Let’s say the Gomez family is selling their home for $300,000. They are willing to come down a little but not much. The house is very well taken care of and they recently remodeled the kitchen and bathrooms with high-end materials.  The Smiths offer them $290K with $50,000 down and the Dumonds offer them $300,000 with 3% down. Initially the full price offer may seem like the best offer, but there are things that could come up that could make the Smiths offer the more viable offer overall.
      reviewing-offers-real-estateFor example let’s say that the Gomez’s know the house will only appraise for about $285-90K. That would mean that the Dumonds would have to potentially come up with a difference of $10-15K to close the deal. That may be difficult for the Dumonds because they have exactly what they need for a down payment and just enough to pay for the closing costs. But that same scenario would not be the case with the Smiths, because by having a $50,000 down payment they have enough to overcome any difference that may come up during the appraisal.The key takeaway here is that the highest offer is not always the best offer. If you are buying, your Realtor® will help you put together the strongest offer possible based on your finances.  If you are selling, your Realtor® will help you evaluate and choose the best offer. If you are selling For Sale By Owner, educate yourself on how to evaluate different offers so you choose an offer that will close.
    3. Conventional, FHA and VA Loans – Like offers, loans are not made the same. The most attractive kind of loan is a conventional loan. Coupled with a large down payment is the second runner up to a cash offer. Conventional loans tend to be less exigent when it comes to demands for closing.  This is attractive to both sellers and buyers for many reasons. A buyer may not be looking for the perfectly renovated house but one they can call home and remodel to their taste.FHA and VA loans have to follow certain guidelines with means greater demands when it comes time to selling the property. For example, you may have a home with a roof that is over 20 years old. You would not be able to sell it to an FHA or VA buyer even though the roof is a concrete poured roof and has a life expectancy of a 100+ years. If you are the buyer, chances are that the seller will not change the roof for you. You will have to move on to another home which perhaps is not your ideal home. If you are the seller then you just lost a potential buyer because of a demand that can be overcome with a more flexible loan.

While it may not be evident to the naked eye, as you can see from reading this article, in real estate all offers are simply not made the same. Whether you are buying or selling it is important to know the difference so that you can make an informed decision about your next real estate deal.

-Désirée Ávila

Désirée Ávila was an award winning teacher for 10 years and has a doctoral level education in Educational Technology. Désirée is now a licensed Florida Realtor and committed to a high-level of professionalism and to helping others with their real estate endeavors through education.

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