Right now in Maricopa County, the market favors sellers and multiple offer situations are more common in homes with listing prices under $200,000. While there's certainly no shortage of advice for how homebuyers should navigate with such circumstances, much less information is available to sellers. If you are considering selling your home and are aware a seller's market essentially exists, you might mistakenly believe said conditions will cause a flood of purchase offers. While this may happen, there's a big difference between receiving multiple offers and closing.
How Home Sellers should Deal with Multiple Offers
Because your ultimate goal is to close the transaction and receive a good return on investment, you should know how to deal with multiple offers. Buyers are typically advised to set a customized-term seller closing date, to drop certain contingencies, offer a larger earnest money deposit, and so on. You'll notice each contains a level of risk but such strategy is necessary to win a bidding war. For home sellers, different advice is given but it's still a matter of fashioning a feasible transaction to get through closing.
...the seller has many options and really has most of the control here. With multiple offers, the seller can simply select the one that he or she favors most. Or, they can counter all offers to get the best price and terms. Or, they can counter the one closest to the price and terms they’re seeking. --Realtor.com
In a normal or balanced market, approximately 10 percent of all transactions fail to reach the closing table. This number increases dramatically about 5 times as much in a true seller's market. That means about 50 percent or more of pending transactions fall through. The problem lies in the dynamics of a seller's market: multiple offers push the selling price upward until it exceeds reasonable appraisal value. As a result, lenders decline final financing approval (if you are the seller, this should concern you). But other issues arise as well. Here are some helpful tips about how home sellers should deal with multiple offers:
- Compare purchase offer prices. Although the highest purchase offer price will definitely grab your attention, understand this should not be the deciding factor. In a market favoring sellers, buyers become frustrated and make poor decisions. A buyer offering less for the home but putting more cash toward the deal is a better choice than one doing the opposite.
- Look carefully at the contingencies. Purchase offers typically contain buyer escape hatch contingencies. These allow the buyer to walk away with earnest money deposit in-hand, scot-free. Some savvy buyers will drop one or more contingencies, like forgoing a home inspection or being approved for financing. While this is advantageous to the seller, it might cause serious problems with the transaction.
- Consider the type of purchase involved. In the majority of residential real estate sales, buyers finance a large portion of the purchase price. Therefore, a cash deal for less is without the risk of buyers needing a big mortgage approval for the listing price.
- Think long about your property's true value. Don't forget, your property's appraised value will play a big role in the sale of the house. If the appraisal comes in at less than the agreed price, the lender will likely lower the mortgage approval amount. If the appraisal is higher than the agreed selling price, the buyer will have to come-up with the difference.
- Weigh any seller incentives made by each buyer. A buyer may include an escalation clause, offer a short or long closing timeline, drop certain contingencies. Weigh the difference between these to help you make a better choice.
If you are considering selling your home in the Tramonto community, whether it’s nearby West Via Del Deserto, North 31st Avenue, or Tramonto Park, or elsewhere in Phoenix, give us a call to learn about how to best market your property to get a good return on investment.