Thinking of selling your home in Los Angeles? Until recently the Los Angeles real estate market strongly favored sellers and multiple offers were the norm. Inventory was low and buyers were desperate. Chances are if you put your home up for sale it was going to get offers almost immediately, more than one. Of course you still needed to list the property at or close to market price. If you overpriced it then it sat on the market and you ended getting less than you would have had you priced it correctly at the beginning.
The market is changing to a more balanced one, and in some areas and price ranges, to one favoring buyers. You may end up getting more than one offer, but whether it is two or 22, your vetting process should be the same.
It should be a simple process to pick the successful buyer right? Just choose the one who offers you the most money, especially if it is all cash.
There is more to just the highest price offered on the listing. Much more.
Your Realtor® will work with you to determine the best offer, not just the highest. What do I mean by the “best offer”? Here are some scenarios to consider based on having received nine offers, a pretty conservative number based on what is going on these days. I was recently in a 27-offer bunfight.
- All offers are at or over asking price. In a multiple offer situation a buyer’s agent will be advising their client not to offer any less than the asking price, and often a little more.
- Three are all cash offers and six require a loan. Two of the cash offers are a little below the offers requiring loans and one is equal to.
- Four of the offers requiring a loan have an appraisal contingency in place which means that should the property not appraise then the buyer may ask you to reduce the price, or they may walk. They may decide to pay the difference themselves, but that is a risk. The other two buyers have removed the appraisal contingency. The latter scenario is not likely, but desperate buyers are becoming creative. You will find them offering a cash purchase and once escrow is closed they will take out a loan.
- Of course your agent will check the financial viability of the buyers, either though proof of funds for the cash offers, or by talking to the lender of those requiring a loan, and maybe asking for proof of funds for those also.
Let’s put the three cash offers and the two loan offers without an appraisal contingency in the top position for consideration. Let’s say there is not a huge difference in the price offered, we will now look at the five offers and how clean they are:
- There may be an offer which stands out because most if not all the contingencies have been removed (an inspection has to be waived by the buyer), then you may gravitate towards that.
- If offers are similar then you may gravitate towards the cash buyer since they are the most likely to close as they are not at the mercy of getting a loan. But make sure that the buyer is not an investor. Often investors make offers on multiple properties at once to see which one sticks. You don’t want to find that you accept their offer only to have them back out for a better property.
- Another consideration will be a personal one. If there has been any interaction between your agent and the buyer and his or her agent, they may get a sense of the ease, or lack of it, that will accompany the escrow process. Working with difficult personalities can jettison a deal.
- However, if there is no one stand-out offer, then you can issue a counter offer asking for “best and final” from each buyer or setting the terms and price you want. You can issue them all the same counter or each a different one.
- Of course you may find that you connect with a particular buyer whom you would like to see move into the home you love.
One thing to be careful with is the removal of the appraisal contingency on a loan offer. You do not want to find that the property does not appraise well and that the buyer finds a way to get out of their contract. The way properties are being bid up that is a danger.
Bottom line, you would like to net the most possible for your home and getting multiple offers sounds like a dream. However, determining the best one and the one which is going to close is no easy task. To protect yourself always put a back-up offer in place.
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