Step 7: Handling Offers on Your House

The home selling and buying process is complicated, with many moving parts. There’s also a time element to consider. Buyers need to find a home before their pre-approval expires and sellers want to get an offer before they must re-sign with an agent. If you’re also trying to buy a house, especially if you’ve submitted an offer with a time-bound home sale contingency, you may be tempted to jump at the first offer you get.

This is where your agent comes in. You want to get the best price possible, and so does your agent. Since they aren’t as emotionally invested as you, and because they have experience handling offers, they will assist you with determining good offers from bad and help you negotiate to get the best price. They’ll also make sure that any potential buyer is in a financial position to even make an offer by ensuring they have a pre-approval letter.

 Negotiating an Offer

Just as your agent is helping you, the buyer has an agent helping them, as well. Luckily, your agent should have a good idea about the popular negotiating tactics and can make an educated guess as to what the buyer’s agent is coaching them to do.

The offer is a contract, and as such it can range from simple and straight-forward to very complicated. Your agent will alert you to anything that isn’t standard, such as anything hand-written into the contract or addendums with radically different language.

Once you have a viable offer, it’s time to start negotiating. If you’ve priced your home fairly and you’re in a seller’s market, you can counter with your original list price or reject the offer entirely and invite the potential buyers to resubmit. This will show them that you’re firm on your price. If they are serious about buying your home, they’ll come back with a better bid. Once they do, you can begin the real negotiations from a more favorable position.

If you decide to counter-offer, make it time-sensitive so you won’t get caught up in a never-ending and legally binding negotiation. You’ll still be free to entertain other offers should they arise.

In addition to trying to get a better price, buyers may ask for other concessions, such as requesting that you cover part of their closing costs. If you make such a concession, try to work the closing costs into the overall price of the home. For example, you might stipulate that you’ll cover closing costs at the time of the sale, but only if the buyers are willing to compensate you with a higher purchase price. The buyers get to conserve cash flow when they need it most, and you won’t lose any money, so it’s a win-win.

It’s easy to get caught up in the negotiation process, so prepare ahead of time by discussing the process with your agent. Make sure you know the answer to the following questions:

  • What is your lowest selling price for your house?
  • Do market conditions warrant your counter offer?
  • Should you make a full price counter offer?
  • What offers, conditions, contingencies, fixes, and closing costs are you willing to negotiate?

people discussing an offer on your home selling

Tips for Successfully Negotiating a Home Offer

While your real estate agent is there to advise you and help you understand the details of the offer, whether to reject, negotiate, or accept an offer is completely up to you. Therefore, it’s a good idea to know a little about how to negotiate.

First, know your market. Hopefully, you’ve reviewed comparable homes in your neighborhood with your agent, but it might be a good idea to review them again. Some real estate markets are steady, but others may fluctuate rapidly. Make sure you know your home’s current market value.

Be patient. If you’ve priced your home fairly, don’t immediately accept an initial offer. The first offer is probably below the buyer’s actual price limit, but they are hoping to get your asking price down. Trust your agent to help you through the negotiation process.

The negotiating process doesn’t stop when you’ve agreed on price. You may find yourself negotiating during the appraisal and inspection process, as well.

What Is a Kick-Out Clause?

Many buyers will want to add continencies to their offer. Common contingencies include the financing contingency (the sale of the home is contingent on the buyer’s home loan being approved), the inspection contingency (the sale of the home is contingent on the results of the home inspection), and the appraisal contingency (the sale of the home is contingent on the results of the home appraisal). While these contingencies typically don’t disrupt the sale, another type of contingency often does: the home sale contingency. If a buyer can’t buy your house until they’ve sold theirs, they’ll add this contingency to their contract. This essentially takes your home off the market, and if the buyer is unable to sell their home within the time allotted, the sale falls through.

If you decide to accept an offer with a home sale contingency, you might want to add a kick-out clause. This states that during the time of the home sale contingency period, which is often between 30 and 90 days, you can continue to show your home. If you get another offer during this time, you’ll notify the first buyer, who must then move forward with the sale. If they can’t purchase the home, the agreement in legally voided and you can move forward with the new offer.

Negotiating the Appraisal

If your home doesn’t appraise for the agreed-upon price, you have some options. The first option is the simplest: lower the sale price. If you’re not willing to do that, you could split the difference between the sale price and the appraisal with some of the other costs. A low appraisal could be just as bad for the buyer as it is for you. In this case, they might agree to getting another appraisal. Since there are no absolutes in home appraisals, different appraisers will provide very different numbers, so this is worth considering. No matter which option you choose, you’ll have to negotiate with the buyer to keep the sale going.

Negotiating the Inspection

Home inspectors usually present a list of items for repair. Most of the time, these items are minor and you can negotiate with the seller which of the items to do or leave alone. However, if the inspection uncovers a serious problem, the buyer may want to negotiate the sale price. When choosing between fixing the problems yourself or dropping the sale price, consider what percentage of the sale the fix ultimately costs. If a fix is less than five percent of the sale price, you might want to fix it yourself. If the fix is more serious (for example, 10 percent of the sale price), you might want to lower your offer. This is not only because of the expense to fix the issue but also the time involved in a lengthy repair. The more major the repair, the longer it will take, which will delay you being able to move.

What If I Don’t Get an Offer?

Once you sign a contract with your real estate agent, time is of the essence. Generally, the faster a home is sold, the closer to the desired price the homeowner will get. It’s imperative that you and your agent work together to get your home sold as quickly as possible. But what if you don’t get any offers? While this isn’t typical, it does happen. The way the problem presents itself can help you determine how to solve it.

If no one is coming to your open house, you have a marketing problem. Ask your agent what type of marketing is being done. Your agent should be utilizing social media and spending a good amount of money on marketing. Make sure your agent isn’t just advertising on one social site. To get maximum exposure, you want your home on as many social sites as possible. You may need better photos, or perhaps some drone footage would help.

If you have a lot of showings but no offers, you may have a price problem. If you’re hearing great feedback on your house but you still aren’t getting any offers, this may mean that your home is overpriced for the market. The absence of even a low-ball offer means buyers are so intimidated by the price, they don’t even want to try negotiating. You don’t want to lower your price more than once or twice. Buyers become suspicious when a home price is lowered multiple times. If you’ve already lowered the price and still can’t get any offers, consider taking the home off the market and starting over again.

You’re getting offers, but they are all too low. If buyers are making lackluster offers, you might want to consider adding some buyer incentives. These incentives can be large or small, such as including furniture or window treatments, or offering to share the closing costs. Some home buyers have plenty of credit but not a lot of cash. These buyers might be struggling to pay both the down payment and the closing costs. By offering to take on the closing costs in exchange for the overall home price, you might attract more buyers.

Once you have an offer that you’re happy with, it’s time to prepare for the close! We’ll look at what to expect at closing in step eight.