What to Consider in an Offer: An FAQ for Savvy Home Sellers

For many individuals, selling a home is one of the most significant transactions they'll ever be a part of. The sale of a home isn't just about getting the highest offer price—it's about securing the best possible deal. If you're fortunate enough to be faced with multiple offers—or considering whether an offer is strong enough—it's crucial to look beyond the topline dollar amount and consider the nuanced details that can greatly affect the outcome of your sale.

In this guide, we'll help home sellers learn how to break down offers into their essential components. By understanding and valuing these elements, you can ensure that the offer you accept is the one that truly maximizes your home sale's potential.

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The Buyer's Financial Strength

What is Pre-approval or Proof of Funds?

When reviewing an offer, you'll need to consider more than just the contract—you'll want to make sure you have proof that the buyer is making an offer they can back up. In most cases, home buyers will obtain a mortgage to finance their purchase. It's crucial to make sure they've been pre-approved by a lender. Most listing agents won't even consider a financed offer if it's not accompanied by a pre-approval.

If the buyer is making an all-cash offer, there also needs to be documentation. This can come in the form of a bank statement, investment portfolio, or a combination. Ultimately, your agent should know what is acceptable and be able to guide you.

What is a Down Payment Amount?

The down payment is a direct reflection of the buyer's equity in the property. A substantial down payment not only indicates a buyer's financial strength but also offers the seller greater assurance in the deal, often leading to a more competitive offer. For example, a buyer offering a 20% down payment will likely be able to cover any unexpected expenses more easily than a buyer offering 5% down.

What is an Escrow Deposit?

Also known as a good faith deposit, the escrow amount speaks volumes about the seriousness of the buyer. Since this money is usually non-refundable if the buyer breaks the contract, a higher deposit signals a more assured buyer.

Contingencies and Conditions

What is an Inspection Contingency?

An inspection contingency allows the buyer to retract the offer or request repairs if an inspection uncovers issues with the home—and it will. Even the best-kept homes will have some imperfections that an inspection report will address.

However, a strong offer will not try to nickel and dime the seller with small requests. It's not uncommon for a buyer to include language in their offer package stating that they will only request repairs or credits for major issues.

It's important to review inspection requests with your agent—they'll be able to guide you on which requests you should agree to and which are not your responsibility.

What is an Appraisal Contingency?

If the buyer is obtaining a mortgage, their lender will require a home appraisal. If the appraisal comes in lower than the price on the contract, the lender will only finance the appraised amount. This has been a big issue in recent years due to bidding wars.

To make their offer stronger, a buyer can agree to either match an underappraisal up to a certain value or waive the appraisal completely. In either case, they will need to have extra money available to cover the gap. Buyers who offer terms like this—or who are making a larger down payment—are a strong option for sellers.

What is a Home Sale Contingency?

A home sale contingency makes the purchase of your home dependent on the successful sale of the buyer's existing property. Sellers should assess the likelihood and timing of this sale, as it often introduces uncertainty and the potential for a delayed closing.

Timeline Flexibility

What is the Average Time from Accepted Offer to Closing?

When an offer comes in on your home, there will be an estimated closing date included. Provided the buyer is trying to close ASAP, this date will be about 45 days out for a mortgage-dependent purchase and about 14 days for an all-cash offer.

What is a Flexible Closing Date?

Depending on your timeline, a buyer who is flexible with closing date can be a huge advantage. This often means they can close ASAP but do not need to, which may allow the seller to control the timeline.

What is the Potential for U&O (Use & Occupancy) or Rentback?

While less common in today's market, a U&O agreement allows for a seller to continue living in their home for free after the closing date. This is often used when a seller isn't ready to move in time for closing and the buyer is flexible on their move-in date. When included in an offer, it's a BIG money saver for the seller since the buyer will assume the mortgage payments once closing occurs.

Buyers can also offer the seller a rent-back option, where the seller can live in the home after closing for an agreed-upon rental rate. This gives the seller more flexibility with moving out—but comes at a price.

Conclusion: What's the Best Offer?

With all these factors in mind, it's clear that evaluating an offer on your home is about much more than the bottom line. Each component—from the buyer's financial status to contingencies and timing—collectively shapes the real value the offer brings. While offer price is important, these factors play an important part in what you'll ultimately end up netting.

As always, a great first step to saving thousands on your home sale is to take advantage of Houwzer's 1% listing fee.

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