Price is a key part of a homebuyer’s offer, but there’s lots of other financial information within the typical offer, which will help you decide whether a particular buyer is really ready and able to close a sale.
In fact, if you’re lucky enough to receive multiple offers on your house, you won’t necessarily want to choose the highest-priced one. A buyer with solid financial backing—or who’s offering an unusually high down payment or all cash—may be your best bet, even at a lower price.
Taking into account these market realities, try to judge just how realistic and fair a buyer’s offer is. Focus on meeting your goal—selling your home for its current market value.
The offer may be accompanied by a sum of money—called an earnest-money or good-faith deposit (or a "downpayment" in New York state).
Sometimes the deposit is paid in two parts: a flat fee (such as $500 or $1,000) when the offer is submitted, and the rest, usually a percentage of the purchase price, when the contract is signed. The idea is that a buyer who backs out of the deal for a reason not contemplated in the contract will forfeit this sum (otherwise, the money is typically applied toward closing costs).
A higher deposit means less risk for you, because the buyer has enough skin in the game to not back out for minor reasons.
The offer should state how much the buyer plans to pay in cash toward the purchase price. The higher the down payment (ideally, 20% or more), the greater the chances that the loan will close successfully.
Also look at when the buyer plans to make the down payment (such as 10% down within first two weeks of signing the purchase agreement and the remaining 10% at closing).
Almost as important as the offer amount is how the buyer plans to pull together the money over and above the down payment, and the chances for getting a bank loan for that amount.
Unless you receive an all-cash offer, the buyer will probably include a financing contingency in the offer. This states that the agreement will be finalized only if the buyer applies for financing within a certain time period and then successfully obtains a loan on certain specified terms, such as at no more than a certain maximum interest rate.
All cash offers are not unheard of, so you may be particularly tempted by them. Just ask for some proof that the buyers really have the money in liquid or easily accessed form.
Here’s how to evaluate a financing contingency, for those offers that include them.
A prepared buyer will have already gotten loan preapproval—that is, a lender’s statement of willingness to lend a certain amount of cash (ideally, equal to or greater than the sale price of your home). This means that a lender has given the green light, though no actual final commitment (that will happen on or near the closing date). In many markets, preapproval is so standard that you should wonder why an offeror doesn't already have it.
Another issue to consider is how soon before the closing date the buyer will find out that financing has come through. You’ll want to make sure that the date for the buyer to remove any financing contingency isn’t so far out that the buyer can withdraw from the transaction right before closing because the lender ultimately said no.
Negotiate for a date that lets you know sooner rather than later when the buyer’s financing will come through.
Get as much information as possible from a potential buyer to make sure the buyer is in good position to get a mortgage loan, such as whether the buyer is selling another property before buying yours and the buyer’s credit score.
For more on evaluating real estate purchase offers, see the book Selling Your House: Nolo's Essential Guide, by Ilona Bray.