As a seller, you’re obviously inclined to accept the highest-priced offer you can. In a competitive seller’s market, you might receive lots of offers at once, with some of them going well over your initial asking price. Even in a buyer’s market, with plenty of inventory to choose from, you may be forced to consider multiple offers at or near your asking price.
In general, the seller’s decision is fairly straightforward; optimize your timing and strategy to nab the offer with the highest price. However, there are some situations where you might accept the lower of two competitive bids, or a price much lower than your asking price.
Why Accept a Lower Price?
Let’s take a look at some of the motivations that may lead a seller to accept a lower offer:
1. Home sale urgency.
If you have a pressing need to sell your home quickly, you might be pressured into taking a lower offer than you could otherwise get. For example, you might have a new job that you need to start as soon as possible, or you might be facing foreclosure or another kind of serious debt. If that’s the case, $150,000 now might be far more valuable to you than $160,000 later.
2. A cash offer.
You could also choose a lower offer if it’s being paid in cash. There are several advantages for sellers to accept cash offers; for example, there’s no appraisal contingency, which means the buyer isn’t going to have to wait for a formal home appraisal to determine whether their offer is a fair price. They also don’t have to go through the paperwork and uncertainty of applying for a loan. Plus, accepting a cash offer usually results in a faster closing process, which is good news if you’re trying to move relatively quickly.
3. Lack of interest.
Let’s say you received an offer on your home for $200,000, but you turned it down, thinking you could get more out of the home. The buyer moved on, and you waited for more offers to come in, but after three months, there was no sign of interest. Then, an offer for $195,000 comes in. Do you accept? It’s a lower offer than what you received initially, but the longer your house stays on the market, the worse it’s going to look. Accepting that $195,000 might be the best decision.
4. Alternative compensation.
Not all offers have to be in straightforward currency. You might accept an offer of $15,000 lower if it also comes with compensation in the form of a vehicle, or another significant asset. There’s endless room to negotiate here, so you might find something more appealing in a lower-priced offer.
5. Friends, relatives, or other contacts.
For one reason or another, you might find yourself selling to a friend, relative, or other significant contact. If that’s the case, you might want to accept their offer on your home, even though it comes in at a lower price than a stranger’s competing offer. You may want the home to be taken care of by good people, or you may have an emotional reason to keep it in the family. You might also just be doing your relatives a favor by selling it to them for a lower price. Whatever the case, these high-value relationships may be enough to justify a lower-value offer.
6. Home inspection worries.
If your home is in lackluster condition, or you’re worried the home inspection might reveal some new information that justifies a lower offer, you might be inclined to accept a lower overall offer—so long as it waives the need for a home inspection. Generally, buyers are encouraged to get a home inspection no matter the circumstances, but under the right conditions (such as limited inventory or an exceptional neighborhood), buyers will be willing to forgo them in exchange for a lower total price.
7. The earnest money deposit.
The earnest money deposit is a show of good faith that the prospective buyer is taking this matter seriously. It’s also a demonstration of financial accountability, and an indication that the deal is more likely to go through when all is said and done. Accordingly, you may disproportionately weigh in favor of an offer with a sizable earnest money deposit—even if it’s a few grand lower than a competing offer without one.
8. Expiration dates.
Sometimes, offers come with an expiration date. If you’re presented with two competing offers, and the higher offer expires in 48 hours, you may not be able to finalize your decision in time to capitalize on it. This is a rare situation, and some expired offers may be relisted, but it could still be cause to accept a lower subsequent offer.
9. Contingencies and demands.
You could also accept a lower-priced offer if it has fewer contingencies than the higher offer. For example, one couple might offer you $185,000, but only on the condition that you fix a dozen or more small things wrong with the house that their home inspector found, and only if the appraisal comes back to value the home within a small margin of error of that figure. The other offer might be for $175,000, with no contingencies whatsoever. No contingencies means a sure deal, and probably a faster one.
Solidifying Your Strategy
There’s no right or wrong motivation for selling your home, but it’s important to proactively acknowledge, then work toward achieving specific goals. In this case, it’s perfectly reasonable to accept a lower home purchase offer—so long as you’re doing it for the right reasons. Working with a professional real estate agent will help you understand and define your goals, and give you a good sense of what a fair price is (with those goals in mind).
If you’re confused about the process of home selling, or just want another opinion on your home, contact Green Residential today. We’ll make the home selling process easier on you, and present you with all the information so you can make the best possible decision as a homeowner.