Not all house offers are made equal. It’s easy to get excited when offers start to roll in after listing your home.
Homeowners can receive multiple offers and assume they are all set. Sadly, there is more to an offer than the price. Politely declining a house offer is oftentimes the smartest decision for a seller. Identifying what makes an offer worthy of being rejected is the key.
Here are three reasons to reject your next house offer when listing your home.
Too Many Contingencies
Contingencies can feel like the bane of a seller’s existence. An offer can come in that initially looks great. The price is high, and the closing timeframe is quick. Look again! Do yourself a favor and count the contingencies in the purchase agreement. If you see more contingencies throughout the contract than you can count on your fingers, that’s a red flag.
Like offers, not all contingencies are made equal, either. Some contingencies aren’t too strict and won’t blow up the deal. When selling a damaged house, it’s common to see multiple contractual contingencies in an offer. On the flip side, other contingent clauses completely derail the entire process.
For example, a due diligence inspection contingency of 4 weeks can mean that the buyer can walk away from the deal within that timeframe if they find something that appears ‘off’ in or around the property.
House flippers and investors commonly use the inspection contingency. By inserting this contingency into the contract, they have an exit with your time as the expense. When sellers see this contingency, consider rejecting the offer.
You can politely decline their offer to purchase your home because of the contingency in place. You can also counteroffer if you have a good feeling about this buyer and everything else checks out. Negotiating more favorable terms will keep you from losing out on a good buyer but make the deal sweeter.
No home seller enjoys receiving lowball offers. It can feel like a slap in the face depending on how low the amount is. Is the buyer calling your baby ugly?
Receiving a lowball offer is a great reason to reject it. Simply put, your price is your price. If you have to make a certain amount from the sale of your home, lowball offers won’t cut it. Homebuyers have thick skin and will understand if their lowball offer gets rejected.
When buyers give a lowball offer, they usually know it is much lower than the asking price. This is all a part of the real estate sales process, unfortunately. Instead of instantly declining the lowball offer, sellers can also counter it. Some homebuyers automatically give a lowball offer to start with the intention of raising it as the negotiation takes place.
Sellers can politely refuse the offer and move on, or counter it. Lean on your listing agent to do the negotiations for you. They are the experts and can help you squeeze more juice out of offers. If buyers aren’t budging once you counter, don’t hesitate to decline their offer to purchase your home fully.
The last thing you want to do as a home seller is to get under contract with a buyer with weak financing. If they can’t actually afford to buy your house, it’s best to cut your losses immediately. Save yourself the time and stress of a deal falling out of contract weeks into the process by reviewing the offer in depth from the start.
What makes the financing of an offer weak? If the homebuyer isn’t preapproved, be cautious about spending too much time with them. They will still need to get pre-approved for a mortgage later in the process if they aren’t already. This process can take weeks and isn’t always successful.
Request a preapproval letter from the buyer’s lender upfront before accepting their offer. This will save you from having to reject the house offer later on. If a buyer is organized and serious, they should have the preapproval letter ready along with their offer. There are more offers in the sea of buyers that have better financing backing than ones like these.
Another hole in a buyer’s financial backing is proof of funds. For most mortgages, buyers will put down at least 3.5% (or more) as their downpayment to purchase your home. Before accepting an offer, seeing proof of those funds is good practice. Buyers can take a screenshot of their recent bank statement to show you that they can put their money where their mouths are.
Tread lightly if a buyer refuses to show proof of funds when making an offer. This can potentially mean that they don’t have the money. If they borrow money from other people, that can get complicated and create issues. Review the entire financing plan the buyer claims and ensure they can perform. Many sellers will reject a house offer without proof of funds accompanying it.