If you have your home on the market, you’ll soon be getting offers. When that happens, you’ll need to decide which offers are best for you.
Your real estate agent will be a huge help with this. Agents know how to determine the pros and cons of an offer, since there’s more to it than just dollar signs. They have a sense of your financial and personal goals, so they can help you decide if the offer being made matches those goals.
Before the first offer rolls in, here’s what you need to know about the offer evaluation process, including the main factors that should go into making a decision with your agent.
When vetting offers, evaluate these areas in addition to price:
The earnest money deposit.
An earnest money deposit, or EMD, is the amount of cash a buyer will pay when the agreement is signed to show they’re serious about buying your home. This money is usually held by the title company and goes toward the down payment at closing.
A standard EMD is 1% to 3% of the cost of the home. If a buyer tries to back out of an offer for no good reason, the seller typically keeps the EMD. Therefore, the higher the earnest money, the stronger the offer.
The down payment.
In most cases, a mortgage requires some down payment. The size of a down payment can determine the strength of an offer. As a seller, your main concern is for the transaction to close. And for that to happen, the buyer’s mortgage has be approved.
In most cases, a larger down payment indicates that a buyer has the cash to make sure the sale goes through. This means that if the appraisal comes in higher than your contract’s sale price, the buyer with a higher down payment would more likely be able to cover the difference with the large amount of cash they have available.
The closing date.
Closing is when the final paperwork is signed and the sale is final. The entire process, from accepting an offer to closing, takes between 30 and 60 days.
Three days before closing, the buyer receives a closing disclosure from the lender, which he compares with the loan estimate he received when he applied for the loan. If there are material differences between the buyer’s loan estimate and closing disclosure, the closing can’t happen until those amounts are reviewed and approved. But this is rare.
Some transactions can take more time, depending on the buyer’s financing. For example, the average closing time for a Federal Housing Administration (FHA) loan is 43 days, according to Ellie Mae.
Whether you want a slow or quick settlement will depend on your circumstances. If you’ve already purchased your next home, for instance, you probably want to close as soon as possible. On the other hand, you may want a longer closing period if you need the proceeds from the sale to purchase your new home.