Multiple offers - Which one is best?!

OP

Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes

9y

Originally posted by @Thomas S.:

Since you are in a strong market I would go back to number one with a counter. Accept his offer with him paying all closing costs. If he refuses go to # 2 with the same offer then #3.

Thanks for the feedback Greg. As I mentioned above I'm trying to get opinions on how to evaluate my current offers, without getting into strategies on how to negotiate the highest purchase price. My real question is if a slightly lower cash offer is better than a higher FHA loan offer. And what is the breaking point. Besides that there are deadlines to all three offers so if I start countering individually I will miss out on the opportunity of countering the others.

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Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

9y

I'd take the cash offer.

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OP

Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes

9y

Originally posted by @Russell Brazil:

I'd take the cash offer.

What if the spread was more? Is there a rule of thumb on the ratio of lower cash offer vs higher financed offer?

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Account Closed

Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes

9y

@Jon Graham I would go with the cash offer unless they want to take longer than the financed options. I would also make sure they knew going in, there would be ZERO price reductions based on inspections.

5 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

9y

Originally posted by @Jon Graham:

Originally posted by @Russell Brazil:

I'd take the cash offer.

What if the spread was more? Is there a rule of thumb on the ratio of lower cash offer vs higher financed offer?

It kind of depends on how much you are gonna net, what your income and other resources are. $5k I'd take the highest offer, but $3k or less I'd probably take the sure thing.

It depends too on what I can get the home to appraise for. Ive been doing this long enough that I know what the house will appraise for and whether it's going to be hard to get a certain price past an appraiser.

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OP

Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes

9y

Originally posted by @Account Closed:

@Jon Graham I would go with the cash offer unless they want to take longer than the financed options. I would also make sure they knew going in, there would be ZERO price reductions based on inspections.

I did have that thought to about inspection repairs. Do you have experience with cash buyers requesting more repairs at inspections? Not that I'm anticipating any. This house is perfect :) But I have had ridiculous repair requests on other properties in the past.

OP

Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes

9y

Originally posted by @Russell Brazil:

Originally posted by @Jon Graham:

Originally posted by @Russell Brazil:

I'd take the cash offer.

What if the spread was more? Is there a rule of thumb on the ratio of lower cash offer vs higher financed offer?

It kind of depends on how much you are gonna net, what your income and other resources are. $5k I'd take the highest offer, but $3k or less I'd probably take the sure thing.

It depends too on what I can get the home to appraise for. Ive been doing this long enough that I know what the house will appraise for and whether it's going to be hard to get a certain price past an appraiser.

Appraisers in our market have been flexible lately trying to allow the market grow, but even still we are close to the top of what I think we will get. So that is def a consideration here as well.

Account Closed

Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes

9y

@Jon Graham Some do, some don't. I do have experience with people trying to make me lose other potential buyers and then cutting the price.

I never put up with that.

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Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

9y

Originally posted by @Account Closed:

@Jon Graham I would go with the cash offer unless they want to take longer than the financed options. I would also make sure they knew going in, there would be ZERO price reductions based on inspections.

Have your agent negotiate here. Tell them you have higher offers, but you want to go with theirs being all cash, but only agree to a right to cancel based on inspection, no right to request repairs or credits, property conveys as is.

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Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

9y

I would accept the highest offer (I actually wouldn't). Cash offer means nothing unless you are in a rush to sell.

As the seller in a hot market you control the deal. I would counter offer and push them up.

OP

Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes

9y

Originally posted by @Account Closed:

@Jon Graham Some do, some don't. I do have experience with people trying to make me lose other potential buyers and then cutting the price.

I never put up with that.

I'm in a position of power here to since I'm currently living in the house and not in a rush to sell. I like the way you think LOL. I have been in situations in the past where I was in desperate need of a sale and it was infuriating negotiating inspection repairs.

David Faulkner

Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes

9y

Good suggestions all ... it all comes down to how likely you think each are to close and adjusting according to that, which is always easier said than done. Once you've made the mental risk adjustments, then yes you can certainly counter any offers on price or terms. Any additional due diligence you and/or your agent could do to qualify the buyers may help ... what is(are) the source(s) of funds? Do you know and have you talked with the prequal lenders? Do their buyer's agent seem competent? Some additional research may help, but there will always be some educated guesswork and you'll need to recognize when you've hit the point of diminishing returns. Do you personally prefer a bird in the hand or go for two in the bush? I unfortunately learned this the hard way when I sold my rental, and had to sell it something like 7 times because none of the FHA buyers could close, but this was way lower end than your property (which looks great btw), so your mileage may vary. Good luck!

Christian Wathne

Investor · San Jose, CA, Bellevue, WA · Member since 2016 · 327 posts · 257 votes

9y

I'll go at this from a different angle; I've had very good success with this strategy.

Kick it back to all 3; tell them... "there are 3 very good offers on the table, please come back to us with your best and final"

8 Reply

Brandon Battle

Real Estate Agent · Buena Park, CA · Member since 2016 · 743 posts · 424 votes

9y

Ask for best an final and set a deadline.Hope for a little more from the cash offer and then accept it unless 1 and 2 go up in offer significantly making it worth taking the risk they fall out of escrow.Cash is and always will be king unless the difference is too much loss to eat.

Eric Munson

Rocky Hill, CT · Member since 2014 · 200 posts · 56 votes

9y

@Jon Graham Wow I'm surprised at some of the comments here. Have you all dealt with banks and borrowers before? Take the cash offer and close it. It's worth $2k to not go through the BS of an FHA borrower.

5 Reply

Natalie Schanne

Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes

9y

Jon Graham - your house looks beautiful. Good job. As a real estate agent, I'm always fascinated by houses that sell very quickly with multiple offers. I wonder whether the homeowner would have received more if he had listed higher. The agent is incentivized to sell the house asap. He or she only gets 3% of every $1 additional you get, so he'd prefer a lower priced, 'surest' thing. Best policy is to ask for highest and best by X date, potentially after 10-20 total showings. You may get higher offers from people who haven't seen it yet. Instruct your agent to tell all showing agents that you have pending full price offers on the table and to bring their best asap if interested. Know that you'll annoy buyers and agents if you ask for highest and best multiple times, and they might get turned off. But, you don't know how emotional these buyers are and how much they want your house. Last thing you want to do is go from 3 offers to 0. Ask agent to compare offers in a spreadsheet - anonymized - like Party A, Party B, Party C to compare offers as apples to apples. Ask for whatever you can get from the agents - proof of funds, credit scores/mortgage prequalification letters, proposed settlement dates. Mortgage prequalification letters should be from a direct lender not a broker. Lender pre-agrees to loan x amount. Broker pre-agrees to shop the loan of x amount to lenders. There's a significant difference. Financing problems can delay settlement 30-60 days and give the person an out for cold feet. You usually cannot keep earnest money for your wasted time (without a fight). Which aligns best with your needs? - Settlement Date (when do you want to move out? For vacant homes, closer settlement dates mean thousands less in holding expenses for property taxes, insurance and utilities). - Contract terms: --Financing: offers contingent on financing are worse than offers not contingent on financing. FHA requires inspections, seller-paid repairs to code, everything must have been perfectly permitted). I also am concerned about the strength buyers who haven't been able to save cash much greater than 3.5% of the purchase price. -- Inspection contingencies - these provide an out. (Friend was tied up in FHA deal for 2 months before it died due to an outrageous home inspection report - 60 year old home was priced 40k below market, buyer gets out after cold feet and asking for the sellers to replace roof, hvac, hot water heater, all kitchen appliances when all in working condition / passed FHA.) --Is a cash buyer willing to waive home inspection contingency or agree to as-is, excluding high gross expenses (like mold). -- Higher earnest money down Good luck. Highest purchase price is not the only consideration. What aligns with your needs? Timing? What are the qualifications / incomes / savings / credit score of the counter party?

8 Reply

OP

Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes

9y

Originally posted by @David Faulkner:

Good suggestions all ... it all comes down to how likely you think each are to close and adjusting according to that, which is always easier said than done. Once you've made the mental risk adjustments, then yes you can certainly counter any offers on price or terms. Any additional due diligence you and/or your agent could do to qualify the buyers may help ... what is(are) the source(s) of funds? Do you know and have you talked with the prequal lenders? Do their buyer's agent seem competent? Some additional research may help, but there will always be some educated guesswork and you'll need to recognize when you've hit the point of diminishing returns. Do you personally prefer a bird in the hand or go for two in the bush? I unfortunately learned this the hard way when I sold my rental, and had to sell it something like 7 times because none of the FHA buyers could close, but this was way lower end than your property (which looks great btw), so your mileage may vary. Good luck!

The cash buyer sent his bank statement with the offer so he's the most qualified LOL. He's got the cash to buy.

OP

Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes

9y

This listing has gone absolutely crazy. When we listed the house we listed almost 15k more than any house has sold in our market in the last 6 months. We know we are at the top of what we can get and get appraised for and I don't think we undershot the listing prince. The showing realtors are all contacting my agent and asking about offers ahead of time. My agent also sent out a multiple offer notice to the people who have offered.

I've had 5 showings so far and 3 offers. I have 11 more showings scheduled today and tomorrow! So exciting.

2 Reply

OP

Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes

9y

Originally posted by @Eric Munson:

@Jon Graham Wow I'm surprised at some of the comments here. Have you all dealt with banks and borrowers before? Take the cash offer and close it. It's worth $2k to not go through the BS of an FHA borrower.

I am pretty suprised too by people not suggesting just take the cash since the offers are so close. I kind of anticipated more of a discussion on how far the spread of profit would be before a cash offer wouldn't be as enticing.

Natalie Schanne

Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes

9y

@Jon Graham - this is so exciting for you. Well, if you get 60% of the next 11+ showings to send you offers as well, then you might get offers a lot higher than asking.

Then the concern becomes whether the counter party has the cash in hand to pay for any difference between the appraisal value and your accepted offer (without trying to renegotiate it down on you.)

I.e. 10k conv financing offer over the cash offer, but appraises for 5k over cash offer. Person needs to bring $5k to the table to buy it, plus up to 20% of the loan amount and closing costs. Again, this is where proof of funds and quality of the counter party matters.

Good luck. Fingers crossed.

Shane Baganz

Rental Property Investor · Saint Cloud, WI · Member since 2016 · 186 posts · 63 votes

9y

Roger is correct. If the home doesn't appraise, no deal will go through, unless its cash.

Kalimah Jenkins

Investor · Marietta, GA · Member since 2014 · 226 posts · 97 votes

9y

I'm in the exact same situation right now. Accepted the cash offer, no appraisal contingency. Close in 14 days. Will net about 3k less but cash is king and allows me to quickly move on to the next.

3 Reply

Lesley Resnick

Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes

9y

Take the cash and a short closing. Be done with it and move on. Should the fha deal falter, you will have to hold the property another moth or longer. It is easy to penny wise and pound foolish when chasing the last dollar, which is always the most expense one.