Choosing the Best Offer

Once an offer is received, you are not required to reply immediately. If you're not certain the price and terms meet your needs, it's OK to take extra time to think about the offer, but make sure you consult with your agent about how much time you have to respond to the offer.

To help determine which offers you should consider, look at the current real estate market: Are homes in your neighborhood selling quickly, slowly, or not at all? Don't assume that one offer will lead quickly to others. One predictable factor in the real estate market is that it's totally unpredictable.

Make a list of your priorities and outline which is most important to you. For example, if you have a minimum price, be clear on what it is. Sit down with your agent when you're ready to review your offer or offers. Bring your list of priorities with you and remember that there's more to an offer than price. For example, has the buyer asked for anything to be included in the purchase, such as appliances or furniture?

When reviewing offers, look at the buyer's funding:

• Does the buyer have all funds in place and ready to be transferred to you?
• Pre-approval is not a guarantee; review the pre-approval letter and compare it to the offer letter.
• Also ensure that the time frame works for you.
• Your closing date should meet the needs of both parties.

Moving forward with an offer

Once an offer is received, you can either accept, reject, or make a counteroffer. A counteroffer is the response you give to an offer asking for modifications. This is also when negotiating begins.

The offer should include:

• The total price
• The amount of the down payment
• The date the closing will take place

Check the offer to see if the buyer is requesting items of personal property, such as a washer and dryer. If you don’t want those items included in the sale, be sure to exclude them in a counter offer.

Most buyers will submit offers using a “California Residential Purchase Agreement and Joint Escrow Instructions” (a form created by the California Association of REALTORS®). This agreement includes, among other things, contingencies which will permit the buyer to cancel without penalty if the inspection of the property uncovers major problems or if they fail to obtain financing.

There may be several counteroffers, so be prepared to continue negotiating.

Is there a secret to good negotiating?

There are several cardinal rules to negotiating effectively. One is to do your homework and learn as much about the buyer as you can. Another is to play your cards close to your vest and not reveal too much information to the other party or their agent. Don't let yourself get rushed into any decision, no matter how tempting it may be. Finally, if you have doubts about your negotiating skill, hire someone to help.

What contingencies should be put in an offer?

Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. A buyer could forfeit his or her deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the seller’s responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.

How is the price set?

It's very important to price your home according to current market conditions. Because the real estate market is continually changing, and market fluctuations influence property values, it's imperative to select your list price based on the most recent comparable sales in your neighborhood. A so-called comparative market analysis (CMA) provides the background data upon which to base your list-price decision. When you prepare to sell and are interviewing agents, study each agent's comparable sales report (the data should be no more than three months old but sometimes up to 6 months depending if there is a lack of more current comparable properties). If all agents agree on a price range for your home, go with the consensus. Watch out for an agent whose opinion of value is considerably higher than the others.

Do I have to consider contingencies?

If you are a seller in a seller's market, in which there is more demand than supply, you probably won't have to entertain too many contingencies. But if you are selling in a buyer's market, when buyers are few, prepare to be very flexible. Granting contingencies also depends upon what kind of price you want to get and on the condition of your property. Remember, contingencies are written into the contract and are negotiable during the negotiation phase only.

What is the difference between market value and appraised value?

The appraised value of a house is a certified appraiser's opinion of the value of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $400 to $750.

Market value is what price the house will bring at a given point in time.

A comparative market analysis (CMA) is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker.

Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.

Low Offers

While a low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer. Full-price offers, or above list-price offers are of course preferred, but there are other considerations involved to consider:

• Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, or even a full price offer may not be as attractive as an offer without that condition.
• Is the offer made on the house as is, or does the buyer want the seller to make some repairs or lower the price instead?
• Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.

What is the best time to sell your house?

There is no "best" time to sell per-se. Selling a house depends on supply, demand and other economic factors. But the time of year in which you choose to sell can make a difference both in the amount of time it takes to sell your home and in the ultimate selling price.

Weather conditions are less of a consideration in more temperate climates, but most of the time, the real estate market picks up as early as February, with the strongest selling season usually lasting through May and June. With the onset of summer, the market slows. July is often the slowest month for real estate sales due to a strong spring market putting possible upward pressure on interest rates. Also, many prospective home buyers and their agents take vacations during mid-summer.

Following the summer slowdown, real estate sales activity tends to pick up for a second, although less vigorous, fall market, which usually lasts into November when the market slows again as buyers and sellers turn their attention to the holidays.

If this makes you wonder if you should take your home off the market for the holidays, consider the advice of veteran agents: You are always more likely to sell your house if it is available to show to prospective buyers continuously.