Imagine this- your real estate agent calls you on a Monday morning to tell you that you just got the first offer on your home. You sigh with relief and feel a sudden surge of adrenaline pumping through your veins as you picture moving out.
But there’s a catch. Your agent tells you that the first offer on your home is a little lower than your asking price. They encourages you to take the deal, telling you that you’re lucky to be offered a six-digit price for your house. You tell them that you’ll think about it and hang up. Now what? You want to wait for a better offer, but you can’t let this offer slip through the cracks.
Should you accept the first offer on your home? Yes, if it is at an acceptable price, the buyer makes a cash offer, accepts your contingencies, and is negotiable. It is often the case that many of these criteria will be met by your first buyer, but not always.
Here are a few things to keep in mind when deciding whether to accept the first offer on your home or wait for a better one:
Why the First Offer Matters
The first offer on your home comes from a super excited home buyer who dreams of moving in and wants to beat other buyers. Most home buyers will make an offer after surveying the market and understanding the displayed price range. It is safe to assume that the offer your buyer has placed on the table has been properly thought out.
Even if the first offer on your home is a little lower than expected, you still have room to negotiate. Make sure to respond with a counteroffer to establish dialogue and show interest in the buyer. The trick is to understand the buyer’s fear of losing a potential home in your favour. You can convey that you have received other offers on your home. This might add incentive for the buyer to buy for a higher price.
Turning down the first offer is risky. In case you do not get a better offer, your house will sit on the market longer. If that happens, most buyers will wonder if there’s something wrong with the house, or if it is overpriced which is why it has not yet been sold out.
What to consider when someone makes an offer in your home:
Things to Consider with the First Offer On Your Home:
Should I take the first offer on my home?
- Consider the Offered Price
If the offer is within 10% of your listing price, open a dialogue and begin negotiating.
- Consider the Type of Transaction
Cash offers financial safety and a fast close on the deal. Mortgage backed deals can be more risky than cash, but very common.
- Consider Buyer’s Contingencies
You and the buyer may have contingencies that need to be met to sell. See where there is room to negotiate with these contingencies.
- Consider the Buyer’s Flexibility
If your buyer is open to negotiation, you may be able to craft a perfect deal with them. If they are un-negotiable, it may be worth waiting for an offer from someone who is.
- Consider the Real Estate Market
If you’re in a seller’s market, you’ll be getting more offers soon. If you’re in a buyer’s market, your first offer may be the best you’re going to get.
Once you decide to engage with the first home buyer, as yourself these questions to the offer is worth committing to:
What price did they offer?
Obviously, you want the first offer on your home to be close to the listed price. In an ideal world, you could get lucky and your first offer will nearly meet the listing price. You don’t want to settle for a bad deal, but don’t get too greedy either. If the first offer is within 10% of your listed price, establish a dialogue with the home buyer and try to negotiate.
What type of transaction was proposed?
When selling your house, buyers will either make a cash offer or a mortgage-backed offer. Cash offers are more reliable because they promise quick closing. Sometimes, buyers who were previously approved could be denied a loan because of a job change or low home appraisal. Hence, you might face a closing delay.
What are the Home Sale’s Contingencies?
Certain contingencies, such as a purchase contingency, state that an offer is valid only if the house’s listed criteria are met. This can make selling a little more tricky. If you want to increase your chances at closing a deal, limit the number of contingencies on your home’s sale.
If you want to attract buyers, you could remove the inspection contingency and the appraisal contingency. Though fairly standard, their removal could lure more buyers in.
Be wary if your first offer includes a home sale contingency. A home sale contingency means the buyer has to sell their home before they purchase yours. If their home is slow to sell, your closing timeline will also get delayed.
How flexible is this Buyer?
An ideal buyer is negotiable and able to adjust to your needs. If the buyer of the first offer is okay with adjusting the closing and moving dates, consider accepting their offer. Think of a scenario where you might need some time to transition after the sale of your house. Having a flexible buyer who is comfortable with negotiating a rent-back agreement will relieve a lot less stress. A rent back agreement allows the seller time to live in their home after it’s sold, giving them extra time to move out and establish their new home. These seemingly minute aspects of making a deal can pay you back enormously in time, money, and stress reduction.
What is the Real Estate Market like?
Home sellers need to be mindful of the market they are in. Being unaware of the current trends in the real estate market can result in a slow sale or accepting a low-ball offer, ultimately wasting time and losing money.
In a seller’s market, the number of home buyer’s exceed the number of homes for sale. Buyers are in competition with one another to buy homes. In a seller’s market, you can include an “offer review date” in your house listing form. Doing this allows offers to pile up before you have to respond to them. That way, the ball is in your court as you can choose the highest bid.
In a buyer’s market, homes in supply exceed buyer’s demand. This causes homes to sit in the market longer, causing their value to depreciate. If your listed price is higher than the listed price of a similar home, you should be open to negotiating instead of denying the first offer on your home completely.
When to Immediately Reject the First Offer on Your Home
All things considered, you should not sell your house instantly to the first buyer you find. You should reject the first offer if:
- The offer on your home is a lot less than your listed price and is below the market value. Don’t let anyone exploit you and your belongings with a low-ball offer.
- Your listing is young, and you do not need to sell your house urgently. If you have time to spare, use it to avail the best price possible.
- If you find yourself pooled with multiple offers on your home and it seems to be popular in the market, take your time to consider each offer carefully. Do not just look at the price; make sure to consider all the factors that will impact the sale.
Selling your home can be a pretty stressful process, and it can be daunting to face these difficult decisions. With these few tips, we believe that you will make the right decisions and sell your home in no time!
For professional help selling your home, come meet our agents!