Selling a House: Do I Have to Accept the Highest Offer?

Sonia Figueroa
Sonia Figueroa
Published on December 5, 2018

When selling a house in today’s market people often assume the highest offer is the best. The market in 2016 has been crazy in Chicago! If you where are in a great location, have priced your property well it will go fast. Keep in mind the condition of your property has to be up to par as well. Overall it’s been a whirlwind when it comes to selling. There are tons of multiple offers and bidding wars happening right now.

I had a client named Mary that just recently sold her home. Here mom is in a retirement home and the family needed to sell her house quickly to pay for the expenses of the community she was in. Mary’s mom had lived in the home for over 25 years.  She managed to keep up with the home but when you walked in it looked like you were back in the 1950’s. The location was sought after and the pricing was right so we ended up getting 8 offers on the table. The price of the property was $220,000

Here were the offers:

Amount Offer Financing Type Closing Date
$225,000 FHA 45 Days
$240,000 FHA 60 Days
 $235,000 Conventional 30 Days
$201,000 Cash 2 Weeks
 $210,000  Conventional 30 Days
 190,000 Cash 2 Weeks
$245,000 FHA 30 Day
 $200,000 Cash  2 Weeks

So can you guess which one the seller opted for?

You probably think that the seller decided on one of the cash offers but she didn’t she decided to go for the conventional offer of $235,000 with a 30 day close. You might be asking yourself, Why?

My seller was in a hurry but not so much to receive $10,000-$15,000 under asking price.  She much preferred holding on to the additional time it would take to close versus closing quicker and not receiving as much money. She also decided not go with the highest price because of the type of financing which is FHA (Federal Housing Administration). You see with FHA there are much more stringent guidelines such as:

FHA Mortgage Insurance – Those who opt for FHA loans are subject to both upfront and annual mortgage insurance premiums.

FHA Loan Limits -FHA’s minimum national loan limit “floor” is set at 65 percent of the national conforming loan limit of $636,150 (as of 2018) 

FHA Debt Ratios – your front-end and back-end debt ratios should be 28 percent and 36 percent or lower. For more on FHA please go to https://www.seesonia.com/how-much-house-can-i-afford/

As you can see getting an FHA loan involves more leg more for the buyer and with that there is more room for errors and untimely closings. Therefore the seller decided to go with a conventional offer which has less restrictions. Better to go with the offer with the lowest potential for complications.

Contingencies

One of there area to look at is are the contingencies when looking to decide on which offer.

The major ones are home inspection and mortgage contingencies. The longer the dates on the longer the time is spent with dealing with issues and getting paperwork in place to close. My seller choose a conventional offer with a 30 day close but the mortgage contingency was set for 15 days from the acceptance date.

Mortgage Contingency – clause is a provision in the home purchase contract saying that if the prospective buyer cannot get a mortgage within a fixed period of time with the specified terms, the buyer can call off the whole deal and get back his deposit.

Home Inspection Contingency  – non-invasive examination of the condition of a home, often in connection with the sale of that home.

One more thing about deciding on which offer to take is the earnest money amount. The higher the earnest money the better it is for a seller because it shows that the buyer is truly serious about the purchase.

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