6 Signs a Seller Should Pass on a Home Offer
There's no way to predict how long it'll take to sell a house. I'm in the process right now, and it's excruciating. When you get an offer from a buyer, your first inclination may be to seize it. The sooner you accept an offer, the sooner you can move into a new place, right?
But not every offer is a good offer — and if you accept the wrong one, the deal could collapse (which has happened plenty of times in my amateur real estate dealings). Learning how to recognize the red flags of an iffy buyer is the best way to protect yourself.
Here are six warning signs to consider before accepting an offer on your house.
1. Buyer isn't preapproved
There's no rule that says a buyer must be preapproved before submitting a bid. But when a person has taken steps to secure a mortgage loan, you know you're dealing with a serious buyer.
On the other hand, if you receive an offer from a buyer who hasn't met with a lender, you don't know if they meet the requirements for a mortgage. If you accept this offer only to learn that they can't get financing, you're back to square one.
2. Buyer is inflexible
Be wary of buyers who have nonnegotiable time constraints for closing and moving into the home. A buyer may want a quick close, which isn't a bad thing if you already have another place. But if it doesn't complement your own timeline, you could end up living with family, or worse, in a hotel, which chips away at money that could go toward your new home.
Then again, a buyer may not want to take possession of the house for 60 or 90 days. This can delay closing on your next property, and if you've already signed a purchase agreement for another property, you could end up juggling two mortgages for a couple of months. Ideally, you should work with a buyer who's able to close and take possession of the house around the same time you're scheduled to close on your new property.
3. Buyer's offer is contingent on selling their house
If a buyer has yet to sell their current house, they may submit a purchase agreement that's contingent on the sale of their home. Accepting this offer is tempting, especially if your property hasn't had a lot of interest. But it's a risky move.
You don't know if or when the buyer's home will sell. If the buyer's property doesn't sell within the agreed upon time frame, you'll have to cancel the purchase agreement. This wastes time and you could potentially miss out on other offers.
4. Buyer offers an amount above list price
A buyer who has a strong interest in your property might submit an offer above your list price. This is good news for your wallet, but you could run into appraisal problems if the offered price is more than your home's value.
As a rule of thumb, a bank will only lend up to a home's appraised value. If your list price is $200,000 and your home's worth $205,000, yet you receive an offer for $210,000, the buyer's mortgage lender will not approve financing unless the buyer pays the difference between the sale price and appraised value out-of-pocket.
An appraisal issue isn't the end of the world, but it's a hassle because you have to renegotiate the sale price. To avoid this hang-up, know your home's market value and select offers within this range.
5. You receive an offer from a cash buyer
A cash buyer can be a home seller's dream. You don't have to worry about the buyer qualifying for financing, appraisals, and many cash deals close relatively quickly. But if you receive an offer from a cash buyer, don't take their word for it. Ask for proof of funds before accepting the offer, such as a bank statement or other documentation. The last thing you want to do is take your house off the market, and then find out a so-called cash buyer doesn't have enough funds to complete the purchase.
6. Buyer requests too many concessions
Some homebuyers are bold and ask for concession after concession. This is typical if your home has been on the market for a while and buyers smell your desperation. They may submit an offer well below your asking price, ask for seller-paid closing costs, request appliances like the washer and dryer, and some go as far as requesting repairs in their purchase agreement.
It's tempting to give in to these requests, but at the same time, don't get in over your head financially. Keep in mind that the buyer will likely also request a home inspection, which could uncover costly hidden problems with the home. If you agree to drop your sale price, pay a buyer's closing costs, and take care of their requested home repairs, this can leave you with little money to address any issues found by a home inspector. If you don't correct issues on the home inspection report, the buyer could pull out of the deal.
When reviewing your purchase agreement, be realistic and don't feel you have to submit to a buyer's every wish.
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