Receiving offers for your home is an exciting time. However, choosing the right offer can be a difficult decision. While the highest bid may seem like the best option, there are other factors to consider. Your listing agent can help you evaluate offers by understanding your financial and personal goals. Here are five important things to consider before deciding to accept or reject an offer.
1. The earnest money deposit
The earnest money deposit (EMD) is the amount of cash a buyer offers to show their commitment to buying your home. This money is typically held by the listing brokerage, or the seller’s attorney and goes toward the buyer's down payment at closing. A higher earnest money deposit makes an offer stronger, and it is usually 1% to 3% of the home's cost.
2. The contingencies
Contingencies are provisions that must be met for the transaction to go through. Here are five common contingencies:
Home inspection contingency
Appraisal contingency
Financing contingency
Sale of current home contingency
Title contingency
Contracts with fewer contingencies are more likely to reach closing in a timely manner. While some contingencies are non-negotiable, most are. Your agent can help you decide which repairs to make if necessary.
3. The down payment
A larger down payment indicates the buyer's financial ability to complete the sale. If the appraisal comes in higher than the sale price, a buyer with a higher down payment is more likely to be able to cover the difference.
4. The all-cash offer
An all-cash offer is ideal for both parties, as it eliminates the need for an appraisal and financing contingencies. This makes the sale less likely to fall through.
5. The closing date
The closing date is the day when both parties sign the final paperwork and make the sale official. The process typically takes between 30 and 60 days. If you need the proceeds from the sale to purchase a new home, you may want a longer closing period. On the other hand, if you've already purchased your next home, you may want to close as soon as possible.
By evaluating these five factors in addition to price, you can make an informed decision when choosing the best offer for your home.