The market has definitely perked up this spring already and we are seeing more multiples offer than before. With multiple offers on homes it has changed the dynamic of how buyers are and should be submitting offers. Not every home with multiple offers will result in a bidding war, so I want to take the time and explain give you a quick overview on what factors of your offer will be taken into consideration by the seller.
- Cash Deal: This has more than one benefit to the Seller, but normally the offer will be significantly lower than what the list price is because of the simplicity of the deal. First it can close right after the title has cleared because there is no bank involved. Second, it is usually in "Sold As Is" which means no work will be done to it. The buyer is still permitted to do the home inspection but you will be much less likely to have anything repaired or replaced.
- Conventional Loan: This refers to the terms, there will be a larger down payment with this loan and the appraisal might be a bit easier. Since there will be no PMI included in the mortgage payment it will increase what the buyer can afford by monthly payment. From a sellers point of view the term itself is better because the buyer is putting down a large amount down of 20%.
- FHA Loan: This again refers to the terms, with a smaller down payment this is often where we see buyers asking for a "Sellers Concession". For a buyer with this loan there will be PMI that will need to be accounted for, and the appraisal must be handled carefully so that the loan to value comes in where it is needed to.
- VA Loan: This is a tough sell for a Seller because the buyer does not have to put any money down. When I have a buyer who is using a VA Loan I suggest still putting down the same amount as what would be due for an FHA Loan to show the Seller your commitment, and you can receive that money back after closing.
Additional Financing Terms:
- Sellers Concessions: The easiest way to explain this term is it just like taking a cash advance from the mortgage to have your closing costs included. There is 2 points of view for a seller with this. First is if the home is going to appraise for $10,000 - $12,000 more why shouldn't they find a buyer willing to pay that. Second is that what if the home does not appraise will their buyer still be able to purchase the home, or will the deal go bust!
- Using Gifted Funds: This is something very common with first time buyers, they will count on "gifted funds" from friends or family. Buyers must check the guidelines of the bank in which they are using about what amount of money can be gifted, and what information they will want and need from the "gifter". Many times buyers think it can simply be written as "gifted" and that be it, but each bank works differently you should let your agent speak with your Mortgage Representative to be clear on those terms.
- Buyers With Homes To Sell: When a buyer has something they need to sell, it puts the seller at risk. First the funds from the buyers are more than likely coming from proceeds of their sale. This means that not only does the seller need things go smoothly with their home, but they are dependent on an agent who is not working for them to push the other deal through quickly and smoothly. Secondly, timing with this kind of sale is very important because the buyers will only have about a week window after one home closes to get into the other which puts the sellers in a position where the buyers timeline is much more important than theirs.
- Buyers With Nothing To Sell: Obviously it is better because the sale is not dependent on any major factors aside from their homes appraisal going smoothly. It also means that the timeline will have less in the way of deadlines aside from the normal mortgage commitment time which is usually between 30-45 days from contract.
- Home Inspections: First let me say no matter what the case is, spend the time and money to get a home inspection no matter how many offers are on a property. It is your way of knowing exactly what your getting yourself into, if you want to move quickly and don't want to spend the money ($500 - $750) at least have a licensed contractor check it out. Depending on what repairs or replacement you want done, can change the mind of a seller on which offer to take. If another offer comes in $5000 less they may go with it simply because of what conditions the offer is based on.