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Stanton’s Sellers’ Tips

Handling Offers Like a Pro

I always say that this business is part art, part science, and nowhere is that more evident than in handling offers.

Consider that you’ve done pretty much everything – prepped your house for sale, figured out where to move, worked with your agent on pricing and marketing, had some showings, and now you have an offer (or offers) on your house. What is your best strategy?

Handling offers like a pro is tricky, but it’s super important since it can affect your net proceeds and your peace of mind.

Here are my top tips:

1. Knowing when to call for best and final offers

Usually, a seller’s best case scenario is multiple offers with a best and final, closed bid protocol. Best and final closed bid gets buyers to offer the most the house is worth to them regardless of price or the next best competing offer; in economics parlance, the seller captures the consumer surplus.

If you have 3 or more agents saying they are definitely bringing offers after the first weekend of showings, then the decision to ask for best and final later that week is fairly simple. However, it’s not uncommon for one offer to come in, then a subsequent offer to follow before the first offer is accepted or out of review. This typically happens outside the heaviest buyer traffic of Spring, in higher price ranges, or with homes that need renovations. It wasn’t unusual in the 2023 Montclair Real Estate market for a house to be on for a few weeks, only to end up with multiple offers to the relief of nervous sellers.

In this case, your agent can guide you on the nuances of negotiating each offer, accepting one of the offers, or asking for best and final offers.

2. Determining which offer is the best offer

Obviously sellers want to get the most money for their home, but other factors may come into play.

• Does one offer have the fewest contingencies?
• If the seller’s next purchase is dependent on this sale, then they want a high level of confidence in their buyer. Is this the buyer’s third deal after blowing up the first 2?
• Are they relying on a high loan to value mortgage, are they going to be scared by a building report on an older home,

Review these specific questions when reviewing bids.

3. Considering an appraisal floor in the case of a low appraised value

If a buyer presents a good loan pre-approval from a reputable lender with their offer, you can be fairly sure they are qualified for their loan. However, the home will need to appraise within the approved loan to value.

In a rising market, like we’ve had over the past several years, appraisals may come in low as prices set new highs (appraisals have to be based on past sales). In this case, sellers and buyers benefit from an appraisal floor, an appraisal amount less than the target amount that would still be acceptable to buyer and lender. If the appraisal is low, the buyer comes with more equity to maintain the loan to value, while the loan to closing price ratio is lower.

4. What to do when your first offer doesn’t work out

You sign a contract and you don’t make it to close for myriad reasons. One party backs out in attorney review (for any or no reason), a contingency isn’t met, or, the most common, building inspection negotiations fall apart.

Next steps are, again, a nuanced decision and depends a lot on how long the house had a signed contract. Do you have an eager back up offer ready to step in? If you had multiple offers and never got out of attorney review, that’s a common solution. If you had one other offer 30 days ago, chances are good that buyer has moved on and you need to come back to market and hope new prospects have entered the buying pool.

Finally

I’ve touched on only a few aspects of adeptly handling offers. Needless to say, you will be working in concert with your agent and need to have a solid trusting relationship.

We’d love to partner with you in your next steps to the road to getting offers.

Questions about the local residential or commercial markets?

Contact me today.

Best, Rich