- Sheri and Liz
Assessing An Offer: What Sellers Need To Know.
AUTHOR: Tamara George
Tamara is a Toronto-based freelance writer who works with real estate brokerages, REALTORS® and condo developers on everything from market insights posts and buyer and seller resources to fun neighbourhood profiles and serious tips for smart real estate investment. She’s a bit of a real estate nerd – one who gets a kick out of scrolling through listings, checking out new developments, and even heading to the occasional open house.
Congratulations! You’ve received an offer on your property. But how do you know if it’s the best possible offer for you? Your REALTOR® will be your guide: they’ll take you through it step by step, review all the pros and cons, and make recommendations based on your personal situation. If there are multiple offers, they’ll walk you through each one, highlighting your best options, and negotiating on your behalf to get the best possible result.
Knowing that, there are still things you’ll want to be prepared for when the sale gets to this point, including price, conditions, and even how serious the buyers are.
How much are they offering?
This is the first thing most people look at, and with good reason. Everyone wants to maximize their return on investment, but the amount shouldn’t be the only factor you consider.
“There have been several cases where our clients have won without submitting the highest offer, ” Brett Stein, a REALTOR® and salesperson at Stein Realty Group in Toronto, Ontario, told us in February. “Another offer we were competing with didn’t come with a bank draft, and we assumed they were at a slightly higher number than us. But because our offer was firm … and we were prepared to hand the bank draft over to the sellers to make the deal firm right then and there, we were able to win the property for our clients.”
Are there conditions?
An offer to purchase will often come with conditions, which can include:
Financing
If a buyer hasn’t been pre-approved (or they aren’t approved for the amount they’re offering), they can make their offer conditional on getting a mortgage. There’s some risk to the seller here: if the buyers don’t qualify, the deal will fall through.
“In a market like this [with interest rates having quickly risen to 15-year highs], deals can easily break down if buyers don’t have financing in place,” says Pouya Ghomi, salesperson and REALTOR® with Century 21 In Town Realty in Vancouver, British Columbia.
A lower offer that’s firm (no conditions) can be a better option for sellers than a higher one with a financing condition.
“I like to see a pre-approval attached to an offer,” says Dimitri Andrianakos, a REALTOR® and broker at Royal LePage du Quartier in Montreal, Quebec. “If there are multiple offers, I’ll recommend giving priority to someone who has done their due diligence. It’s reassurance the sale won’t fall apart.”
Inspection
Having an offer that’s conditional on inspection adds risk. If the inspection identifies an issue, the deal could fall through. For that reason, sellers might choose an unconditional offer, even if it’s slightly lower than a conditional one.
“Should you accept an offer with an inspection condition? That completely depends on how confident you are that there are no major issues,” says Andrianakos. “If I’m working with an owner who has taken good care of their home, I’ll recommend they go for a higher offer with a home inspection condition versus a lower one without. But if an inspection reveals a big issue, that will impact future offers.”
If the buyers end up backing out, that will mean your property goes back on the market, and there’s the possibility the listing will get stale and future offers will be impacted as a result.
Closing date
You might get an offer that’s conditional on the sale of the buyers’ previous home, or one that wants to extend or shorten your stated closing date. If you’re willing to accept an offer with a closing date that doesn’t line up with what you want, Ghomi says you have a number of options, all of which your REALTOR® can help you figure out.
One of the options he mentions is a “rent back,” which allows the buyers to take ownership on the agreed-upon closing date, but the sellers remain in the home for a month or two and pay the new owners rent.
“This is something several of my clients have done,” he says. “That way the sellers have the cash in hand to buy a new property, plus the time they need to find the right one. You can also get bridge financing to cover the overlap, or have your moving company put your belongings in storage while you stay in a short-term rental. We help our clients by reaching out to all our REALTORs® to see who has an available property.”
But ultimately, he says, nobody really loves any of these options, and sellers tend to say no to this condition and wait for another buyer.
Be sure you understand your responsibilities as a seller during closing!
Condo status certificate review
If you’re selling a condo, buyers will want to see how healthy the condo corporation is from a financial and administrative perspective. If you don’t provide this to potential buyers, getting their lawyer to review it will likely be a condition in the offer—buyers don’t want to be surprised by financial or legal problems. It’s good practice to have these documents readily available for buyers, which can help lead to more firm offers as they can be confident in what they’re buying.
Who’s making the offer?
Is it an individual or a corporation?
“I like to check this, because if something goes wrong with the deal, it’s harder to go after a corporation with limited liability for damages,” says Ghomi. “Not that you should say no in this case, it’s just important to be aware.”
For some sellers, knowing whether the offer is coming from a family or a developer can also make a difference. It can be hard knowing your place might be torn down, and nice to know another family will enjoy the home you’ve loved.
How serious are the buyers?
The offer might come with a higher-than-standard deposit, and even have a deposit cheque attached (especially if there are multiple bidders). There may be a personal letter explaining why they want to buy your home—maybe they’re looking for a backyard for their kiddos, or they’ve been dreaming about living in your building. Both are signs that buyers are serious. This can be advantageous as a seller, because it means you’re dealing with people who are just as eager to get the deal done as you are, and there may be some flexibility or room for negotiation.
Is the first offer the best offer?
“It depends on how well you’ve priced the property,” says Ghomi. “If it’s at market value in a ‘normal’ market, then yes, the first offer will probably be a good one. After two to three weeks, however, people will start to wonder why it’s sitting and likely offer less.”
Accepting, countering, or rejecting the offer
Once you’ve reviewed an offer with your REALTOR®, you have three options:
Accept. Say yes, ensure any conditions are met, and proceed with the sale.
Counteroffer. You can sign the offer back to say you want more money or request that they waive conditions. They can accept your counter or submit their own counteroffer. This is where a REALTOR® really comes in handy: negotiation continues until one party accepts or rejects without countering.
Reject. You can simply say no to an offer, but that may not always be the best idea. Ghomi recommends “countering rather than turning it down outright, even if it’s a lowball offer. If you need to go back to those buyers later, you’ll be at a disadvantage. But if you counter and they reject, you have leverage if they come knocking on your door again.”
Another reason not to say no? Sometimes cultural differences can be a factor.
“People from different communities have different ways of negotiating,” says Andrianakos. “Don’t be insulted by a low offer, consider it a starting point.”
When it comes to selecting the best offer for your home, you need to consider a myriad of factors. Your REALTOR® will help provide context to everything you look at, and give guidance based on their expertise.