Why Accepting The Highest Offer Is Not Always Best

Your home has been listed and seen by a few or many people. Now you have a few offers. Your knee jerk reaction is to take the highest offer. That may not be your best plan. The highest offer may not be the best offer and here’s why.

The highest offer may not be best

Why Accepting The Highest Offer Is Not Always BestFirst reason the highest offer may not be best is that your home may not appraise for that price. This is especially ¬†true if your home was the subject of a bidding war. If that top bidder has to get a mortgage then the mortgage company will have the property appraised. If they find that the contract price is higher than the appraised value, they won’t write a mortgage for anything more than the appraised value.

So unless that high bidder can put more money down to make up the difference, the contract will fall through. Those other bidders will have moved on and then you are left holding the bag.

Another reason:

That high bidder may just not have the financing in place or available to complete the sale. Just because they bid or offered the highest amount, it doesn’t mean they can get the financing they need or already have it in place.

Last big reason:

If they have the highest offer, they may also ask for the most repairs or concessions. Here is an example: A woman lists her home and gets a full price offer in less than a week. She accepts that offer and the home inspection takes place. The home, which was updated and in rather good shape inspected well, but the inspector mentioned a few things like “the heating system will eventually give out” although nothing is wrong with it now. The buyers then demanded that the seller replace the heating system, put an expensive filtration system on the well and make some other minor repairs. The seller refused to do anything but the minor repairs.

The house then was put back on the market and another buyer bid for under asking, but it was a cash sale and not one concession was demanded. The lesson? The seller actually walked away with more money in her pocket than she would have with the full price, higher offer.

Have your home appraised

So your best bet is to get information before accepting any offer about financing. Have your home appraised prior to sale so you know what that number will look like. Be prepared. Then you can accept the BEST offer, not necessarily the highest.

Common Home Contingencies When Making An Offer, Part 1

Buying and selling a home can be tricky. Some feel that Common Home Contingencies When Making An Offer, Part 1a way to make things go more smoothly is to waive contingencies. This may or may not be a good idea. Let’s explore some of the most common contingencies and see how waiving or not waiving them.

One common contingency is an appraisal

This may not be a contingency you can waive as a buyer since your mortgage company or bank may require it. Appraisals can be tricky because they can be very subjective. That can make it difficult to sell. Sellers will definitely like this contingency to go away, since market price may not be what the appraiser comes up with and that could put the kibosh on the sale.

Home inspection

Another common contingency is the home inspection. A home inspection is a very important thing for buyers. It gives you an out if something big is wrong with the home. Many serious home issues can be very hard to see, or easy for sellers to hide. A licensed inspector knows where and what to look for when inspecting a home. If you waive an inspection contingency you are stuck with any issues the home has, big or small. If you really think that waiving the inspection is a necessary risk in order to get the home, first try and see if you can get it inspected and not waive the right to walk away if there is a huge problem, but waive the right to ask for the seller to fix problems.

Clear title

Another contingency that is a bit less common, but comes up is requiring clear title. DO NOT WAIVE THIS! Here’s a few good reasons why. First, if there are any judgments attached to the property and you waive clear title, guess who will be stuck paying those judgments? YOU. If there are issues with property lines, you will be the one who has to pay to clear up the issue.

Financing

If you are buying and are asked to waive the financing contingency, don’t. This is a contingency that protects you from having to continue with the sale if your financing falls through. Without it, you could be forced to purchase the home, or open yourself up to a lawsuit if you breach the contract for sale.