How To Evaluate Purchase Offers When Selling A Home

Kyle Hiscock

Re/Max Realty Group

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Top Tips To Evaluate Purchase Offers When Selling Your Home

How To Evaluate Purchase Offers When Selling A Home

How To Evaluate Purchase Offers When Selling A Home

When selling your home, one of the most exciting things is when you actually receive a purchase offer on your home from a potential buyer!  If you take the proper steps, it’s possible you can generate multiple offers when selling a home.

Whether you’ve generated multiple offers or not, it’s important that you understand how to evaluate purchase offers when selling a home.

Recently while selling a home in Henrietta NY, there were a total of 6 purchase offers received on the home and the seller decided NOT to take the highest offer!

How is this possible?  Why would a seller not take the highest offer?

There are many terms and conditions that need to be taken into consideration as you evaluate purchase offers when selling your home.  The highest offer may not always be the best offer!

In this article we’re going to discuss the best tips to follow as you evaluate purchase offers when selling your home.  If you don’t generate multiple offers, it’s still important you know what to look for as you review a purchase offer.

Price Is Important…BUT…Net Proceeds Is More Important

As you evaluate purchase offers when selling your home, it goes without saying that the offer price is very important.  With that said, the price that’s offered doesn’t necessarily mean that’s what you’ll walk away with.

There are several things that can impact your bottom line when selling your home.  The most important figure to understand is your NET proceeds, which is the figure that tells you how much you’ll walk away with from your home sale after paying your expenses.

Below are a few things that impact your bottom line, in addition to price, to keep in mind as you evaluate purchase offers.

Is The Buyer Requesting Seller Concessions?

One of the most common seller expense that can drastically impact your bottom line are seller concessions.  Seller concessions in real estate are a negotiated amount of money that a seller can provide to a buyer to help cover their closing costs and down payment.

As you’re reviewing the price of a purchase offer, it’s important you understand whether or not the buyer is requesting any seller concessions.

If two offers are received on your home, one for $205,000 with a 6% seller concession and one for $200,000 with zero seller concessions, while it may seem like the right decision to accept the higher price, it’s actually not!  The net of the higher offer is actually significantly less than the lower offer, because of the seller concessions.

Potential Bank Repair Expenses

Another important step in a real estate transaction is the bank appraisal.  The bank appraisal is not a home inspection, but is required anytime a buyer is obtaining a home loan to purchase a home.  It’s used as a safeguard for the lender to ensure the home is worth what a buyer and seller agree upon in terms of price but also to ensure the home is “safe.”

While you evaluate purchase offers, you need to be aware of the amount you’re potentially responsible for in the event there are repairs required from the appraisal.  Bank required repairs are one of the most common appraisal issues and can eat into your net proceeds.

If you believe that your home won’t have any repairs required from the appraisal, then this potential expense shouldn’t impact your net proceeds.  On the other hand, if you’re selling your home in as-is condition or believe there could be some repairs required, as you evaluate purchase offers, the amount you’re responsible for any required repairs needs to be kept in mind.

Understand The Potential Buyer

How To Evaluate Purchase Offers When Selling A Home - Understand The Potential Buyer Of Your Home

How To Evaluate Purchase Offers When Selling A Home – Understand The Potential Buyer Of Your Home

As you evaluate purchase offers when selling your home, it’s important that you have a solid understanding of the potential buyers.  While it’s highly unlikely that you’ll have detailed information about the buyers credit score, annual income, or money they have saved in their bank, there are certain things you need to understand before agreeing to a buyers offer.

Is The Buyer Pre-Approved Or Pre-Qualified?

First and foremost, as you evaluate purchase offers on your home, be sure to know whether the buyer has been pre-approved for a mortgage.  There is a major difference between a mortgage pre-approval and mortgage pre-qualification. If a buyer has only been pre-qualified, there is a greater chance that there can be hurdles or roadblocks later on in the transaction.

In addition to understanding if a buyer has been pre-approved or pre-qualified, it’s also a good idea that you’re comfortable with the buyers lender.  There are mortgage lenders who’re very good at what they do and others who aren’t.

A couple ways to know whether or not a lender is good or not is to ask your agent or check out some online reviews.  Experienced real estate agents generally will know which lenders do a great job and will provide a strong chance the loan will be funded as well as the lenders who you should steer clear of.  Selecting a mortgage company can make or a break a deal for some buyers simply because of a companies reputation.

What Type Of Mortgage Is The Buyer Approved For?

There are many mortgage options a buyer can use to purchase a home.  There are mortgage options that allow buyers to put zero percent down and have credit scores of 600 and others that require buyers to have credit scores of 680+ and have money saved for a down payment.

As you evaluate purchase offers on your home, it’s vital you know what type of mortgage the buyer is approved for.  If a buyer is approved for an FHA home loan, it’s important to understand the PROs and CONs of FHA home loans.  If they’re approved for a VA home loan, the same applies, you should understand the benefits and drawbacks of this type of financing.

If you’re unfamiliar with the type of mortgage the buyer is approved for, you should do your research and get answers.  Again, an experienced real estate professional can educate you on the type of mortgage.

Does The Timing Work For You

When you’re evaluating purchase offers while selling your home, it’s critical to consider the timing of the offer.  A purchase offer is filled with various deadlines and dates that you need to keep in mind.  Below are some of the most important dates and deadlines to remember while you evaluate purchase offers on your home.

How Long Will It Take The Buyer To Get Their Formal Written Mortgage Commitment?

As mentioned above, you need to understand whether the buyer is pre-approved or pre-qualified.  If a buyer is pre-approved, this does not guarantee the funds to buy your home are guaranteed.

There are many reasons why a buyer can get denied for a mortgage, even after being pre-approved.  A contract date that you need to keep in mind as you evaluate purchase offers is the formal mortgage commitment target date.

A formal mortgage commitment is only issued once a bank has gathered all of the documents from a buyer, processed these documents, and has satisfied all mortgage conditions.  Once a formal mortgage commitment is issued, the chances that a buyer will secure funding to buy your home are much greater than having a pre-approval or pre-qualification.

The amount of time that it takes to obtain a formal mortgage commitment will vary from lender to lender.  If a buyer supplies documents in a timely fashion, a formal mortgage commitment should be expected within 2-3 weeks from application.  If the target date for a formal mortgage commitment is 45 days away, you should inquire as to why the target date is so far away.

When Is The Closing Date?

Are you buying a replacement home?  Are you moving out of state?  Is your home sale subject to finding suitable property? Are you building a new home?

The closing date is one of the most important considerations to make as you evaluate purchase offers.  It’s critical that the target closing date works with whatever your plans are.

If you’re selling and buying a home at the same time, the target closing date in a purchase offer becomes very important.

For example, if you’re buying a new home and the closing date on your new home is one week after the target closing date of your current home, this can potentially be an issue.  An option to explore if target closing dates don’t align is to request a post closing possession until you close on your new home.

What Contingencies Are Included

Lots Of Contingencies Can Mean A Tricky Home Sale!

Lots Of Contingencies Can Mean A Tricky Home Sale!

Contingencies in a real estate contract must be taken into consideration when selling a home.  Generally speaking, the more contingencies in a purchase offer, the greater the probability the deal falls apart at some point.

While you evaluate purchase offers on your home, you need to understand what contingencies the buyer has elected to include in their offer.  Below are some contingencies that you need to keep in mind while evaluating purchase offers on your home.

Is The Buyer Going To Have Any Inspections?

There are dozens of reasons home buyers elect to have inspections, and rightfully so.  It’s the right of a home buyer to request the opportunity to complete various inspections of your home when making an offer.

Below are a few of the most common inspections that a buyer potentially may make their offer contingent on.

  1. Home Inspection
  2. Radon Inspection
  3. Structural Inspection
  4. Septic Inspection
  5. Well Water Inspection
  6. Chimney Inspection
  7. Pest Inspection

The percentage of home buyers who make their purchase offers contingent upon having at least one of these types of inspections is high.  Due to this fact, whenever meeting with a seller we recommend a pre-listing home inspection.  This can eliminate potential problems in the future!

Does The Buyer Have A Home To Sell?

Contingent offers are better than no offers, however, if a buyer has a home to sell there is no guarantee they’ll end up buying your home.  As you evaluate purchase offers, if a buyer makes their offer contingent upon sale and transfer of title of their existing home, you need to know what stage of their sale they’re at.

If a buyer is attempting to purchase your home and needs to sell their home, the first thing you need to ask is whether or not their home is even listed for sale yet.  If not, you can potentially be waiting for weeks while they prepare their home for the market.

If they have listed their home for sale, have they received any offers on it yet?  If they haven’t received any offers, have they been having a lot of showings?

If they do have an offer on their home, how far along is the buyer of their home in the sale process?  Have they completed any inspections?  Has the appraisal been completed?  Has the buyer of their home received their formal mortgage commitment?

These are all very important things to ask if you’re considering an offer from a contingent buyer.  After you evaluate purchase offers, if you decide you want to accept a contingent offer, you need to ensure you have a first right of refusal clause built into your offer acceptance.

A first right of refusal clause, which is commonly known as a “bump clause,” means that you have the ability to serve notice to the contingent buyer that you’ve received an offer that you’d like to accept, likely an offer from a non contingent buyer.

This clause requires you to give the contingent buyer a notice indicating they have to either remove their sale and transfer of title contingency within a specified number of days if they’re able or that you’ll be accepting the other purchase offer.

Final Thoughts

Receiving purchase offers when selling your home is exciting!  It’s vital though that you understand exactly how to evaluate purchase offers so that you make a smart decision.

There are many factors that need to be considered when reviewing purchase offers, in addition to price.  The above factors will greatly improve the chances that you accept a strong purchase offer on your home.  Neglecting to consider all of these factors can lead to disappointment.

Other Resources To Help Evaluate Purchase Offers When Selling A Home


Are you going to be selling a home in Rochester NY soon?  If so, understanding how to evaluate purchase offers will make the big decision of whether or not to accept an offer much easier!  The above tips are especially useful if you happen to be fortunate enough to have multiple offers and need to compare them.  If you’re looking for a top Realtor in Rochester NY, contact me to discuss your home sale.  I’d love to share my expertise with you and interview for the job of selling your Rochester home!

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About the authors: The above article “How To Evaluate Purchase Offers When Selling A Home” was written by Kyle Hiscock of the Hiscock Sold Team at RE/MAX Realty Group.  With over 35 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.

We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.

© 2017, Kyle Hiscock. All rights reserved.

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