Step 14 To Selling a Home: We’ve Received an Offer. What Does It Mean?
WOO-HOO! We’ve received an offer!
When an offer comes in, we sit down and review it and send it to you as soon as possible with our notes, feedback, and thoughts, as well as with an Estimated Net To Seller at Closing sheet, which shows the numbers of the offer and approximately what this offer will net you at closing. We’ll review it with you. A few main points we want you to pay particular attention to in the contract (which we will are the:
What price did you want for your home? What is the least amount you’d be willing to sell your home for? How does this compare?
Typically in the Atlanta market, closing takes place 30-45 days after contract acceptance. Sometimes buyers will ask for a longer closing date if they are doing a special loan program, need to give their landlord longer notice if they’re renting, need to sell their house, etc. If a buyer is paying 100% cash we can usually close faster than 30 days, but 30 days is generally the required minimum if the buyer is using a mortgage to buy the property. (A lender will need about 30 days to get the mortgage loan in place, though some can sometimes do it a bit quicker; they will allow for a 60-day interest rate lock without charging the buyer extra, so it may be that a buyer who needs a little longer asks for closer to 60 days.)
How much earnest money is the buyer putting down? The typical amount is 1% of the offer/contract price, so while there is no "standard" amount, we consider 1% to be "normal." If the buyer is putting down less than that amount, it could mean that, while they qualify for their mortgage loan, they don't have a lot of liquid cash on hand (earnest money is one of the things that we typically counter in a negotiation period if it appears low). A buyer who puts down more than 1% has likely received very good advice from their REALTOR® that more earnest money makes them appear to be a much more serious, savvy buyer to the seller and listing REALTOR®.
Closing cost credits:
Does the buyer want you to pay a portion of their closing costs? If so, how much? Please note the amount they are asking for comes off your net amount (you will see this on your Estimated Net To Seller at Closing sheet. For example, if a buyer is offering $500,000 for your home, but wants a $10,000 closing cost credit that means the offer is really only a $490,000 offer. In certain price points in our market, a request for a seller contribution to closing costs is pretty normal; they become less expected/accepted the higher we go up in price or with all-cash offers.
Due diligence period:
The due diligence period is the amount of time that the buyer has to complete their inspections and negotiate any repairs with the seller. We look for due diligence periods of 10 days or less, in most cases, unless your home has any special circumstances and may require specialty inspections that can be harder to schedule (for example, a pool or a septic system).
Contingencies related to financing:
There are a number of contingencies that come along with almost every contract, with varying degrees of impact on the seller:
- Financing contingency - the amount of time the buyer has to work with the lender to obtain conditional approval on their loan.
- Appraisal contingency - the amount of time the lender has to order the appraisal and get the appraisal back.
- Proof of funds contingency - for an all-cash deal (in other words, the buyer is paying the full contract amount in cash and is not obtaining a mortgage loan), the amount of time the buyer has to provide proof of funds, either in the form of a bank or investment account statement or a letter from a financial advisor or attorney.
Contingency related to another home sale.
If the buyer currently owns a home and needs to sell it in order to buy their next one, they may send an offer with a Sale of Buyer's Home Contingency attached. There are two kinds of contingencies on the buyer's current home: one that is contingent on their current home selling (meaning they do not have a contract on it yet and may not even have it listed yet -- this is less attractive to a seller and we will need to have a serious discussion about whether you want to accept this type of contingency) and the other that is contingent on their current home closing (meaning it is already under contract with a buyer, they have a closing date, and they may even be finished with the due diligence period -- this is the kind of contingency we prefer).
Depending on the buyer’s particular loan program the down payment could anywhere from 0% (for a veteran or active duty military buyer) up to 20%+. Buyers may opt for a down payment of less than 20% for a variety of reasons, and we always have a conversation with the lender to make sure they are confident (and hence, we can be, too) of the buyer's ability to get loan approval. Down payment really comes into play in the event of multiple offers.
Other concessions the buyer may ask for.
There are a number of other things a buyer may ask for in a contract; here are a few common ones:
- Home warranty - Did the buyer ask you to provide a home warranty? Depending on your home, this can cost you anywhere from $450 up to $1,000 (depending on size of home, whether you have a pool and/or hot tub, septic system, etc.) and is paid by you at the closing table and comes out of your net proceeds.
- Termite letter and/or termite bond - Pretty typically, buyers in the Atlanta area may expect either a clear termite letter or a termite bond on a property. You may already have a termite bond on your home, which will transfer to the buyer; if you do not, it's not unusual for them to ask for one and make it part of the initial negotiation.
- Personal property: Did the buyer ask for any of your personal property to be included in the contract such as the bar stools in your kitchen or the pool table in your basement? You do NOT have to include these items if you wanted to take them with you to your next home. It's all part of the conversation and the negotiation. However, if a buyer asks for too much stuff that you have not already disclosed will remain with the home, it may be a red flag that they are not a serious or realistic buyer.
Want to review the contract in advance? Click here to read a sample Georgia REALTORS® Purchase and Sale Agreement.
Once an offer comes in, we’ll discuss all of the above, as well as any other terms that the buyer has asked for, and then you can decide whether you want to accept their offer, counter their offer or decline their offer. It's normal for a buyer to expect a response from us within 24 hours; however, when inventory is low and buyers are afraid of losing a home they want, they may ask for a much quicker response. We tell every agent that we will do our best to accommodate a buyer's timeline but we will discuss that with you first (for example, if it's your first day on the market and we have a dozen showings lined up that day, we may want to get through those showings before we respond to an offer).
If we decide to counter their offer, realize that some negotiations move fast and others move slow. We’ve had some negotiations take 2 hours while others have taken 2 weeks. It just depends on how quickly each party makes decisions, how quickly the REALTORS® relay that information, the time limits written into each counteroffer, if everyone is in town and easily reachable, etc. Try to be patient, even though we know it's an exciting, anxious time. We will keep you updated and informed every step of the way.