A quick first offer is the dream of any seller and estate agent. In reality though, it is not always that straightforward.
Offers to purchase come in all shapes and sizes and knowing when to accept is not always an obvious choice for sellers. For example, the highest offer is not always the best offer as it may come with contingencies and conditions, and the best offer is not always the highest price offer.
Choosing an offer with the least potential of delays is always a better bet, but it depends on the circumstances.
So, when should you then accept the offer?
While a good offer should be close to your asking price, market conditions play a key role. If the market is booming and there are plenty of buyers competing for properties, then the seller can be choosier. If it is a buyer's market, however, and there are fewer buyers and offers, then the seller would need to take care to not just dismiss any offer, especially if they need to sell.
Importantly though, in most instances, the offer to purchase will include a clause, known as the "72-hour clause" which enables the seller to continue marketing the property so that they do not miss out on a potentially better offer.
Should such a bona fide offer be made by a second buyer, then the seller must give the first buyer written notice that allows them 72 hours to either fulfil or remove the suspensive conditions and proceed with the purchase. Alternatively, the first buyer can elect not to proceed, and the seller is then free to accept the offer from the second buyer.
And while it might be tempting to accept the offer with the highest monetary value, it is essential to assess each of the offers based on its own merits.
At first glance, it would seem that the offer with the highest rand figure would be a natural choice. However, it is best to read through each of the offers carefully, paying specific attention to the clauses in each. This is where working with a trusted real estate agent will be beneficial, as the agent will be able to guide the seller through the process of selecting the right offer to purchase.
While the highest value offer is the ultimate goal, other elements will have an impact on the transaction and should be considered before making a final decision. When considering each of the offers, considering three aspects that will help in the decision-making process.
These include the suspensive conditions of the offer, the financing of the deal, as well as the date of occupation.
Suspensive conditions
The majority of offers that a seller will receive will be subject to certain conditions transpiring first, such as the sale of the buyer's previous home. While it is not very common to find an offer that is entirely void of conditions, sellers should keep in mind that their home will be off the market while the terms and conditions of the offer are waiting to be met. The offer with fewer conditions presents less risk of the sale falling through and is likely to reduce the time a seller's home is off the market without the sale having been finalised.
Financing of the Deal - check for pre-approval
When it comes to financing the home, that unless the buyers present a cash offer, sellers should ask whether they have a deposit saved and whether they are prequalified for home finance. A deposit is an excellent indication that the buyer is in a financial position to purchase a home and are serious about the offer. This deposit will also greatly increase a buyer's chances of bond approval. Beyond asking whether the buyer has a deposit saved, sellers should check if the buyer has pre-approval for a home loan, as this is the most reliable way to prove that the buyer will be able to access the funds when it comes time to purchase the home.
Because a cash buyer will not be reliant on the bank for bond approval before they can go ahead with the purchase, a cash offer makes the transaction far less complicated. Banks are also far more willing to grant finance to a buyer that requires less than 80% of the purchase price of the property.
When checking the financial credentials of the offer, ask whether the buyer needs a third party to sign surety on their behalf. Although it is normally not an issue, it does increase the chances of problems arising. You should also look at whether the buyer can provide proof from the bank that the funds are available to back up the offer.
Date of occupation
The last point of issue that sellers should consider is the date of occupation on each of the offers. If the best offer on the table doesn't quite meet your timeline, you can counter the occupation date. Ideally, the occupational date should coincide with the transfer date if possible, as this will avoid situations where the buyer takes occupation of the property before the transfer goes through. If the offer contains any suspensive conditions, do not allow occupation of the home until these conditions are met, and all documentation is signed by both you and the buyer at the conveyance attorney. Otherwise, you might have to go through a costly and time-consuming process of evicting the buyer if the sale falls through.
Once sellers have considered all these factors and are content to move forward, they can then consider the value of the offer. In some cases, a lower offer might be the right offer depending on the conditions presented.
This is why working with a trusted real estate advisor is so helpful. Real estate agents can be a great sounding board for advice and can help sellers make informed choices when making the various decisions involved in selling their home.
