Multiple offers - Which one is best?!

Buying & Selling Real Estate
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Multiple offers - Which one is best?!

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

I have a property I rehabbed in NW Indiana. We've been fixing and flipping houses in the area for a few years, but this property is my personal residence. I did the work slowly as I had time over the last few years. A lot of time and effort went into making this house special. Friday we listed the house and we have gotten intense intrest. We have had 6 showings and 2 more showing request. As of Today (Saturday) we have already gotten three offers. Really gratifying to see people appreciate our work! I'll briefly describe the offers and if more info is needed ask in the comments

The first offer was highest. FHA loan 3% down. Buyer is asking for appraisal and inspection. Buyer is asking for home warranty and a couple other small things. Offer was 2k above asking. We would net about 71k at closing.

2nd offer was similar but net at closing would be about 500 less once everything is calculated.

The third offer is the interesting one. Cash buy offering a little less but splitting closing costs. No appraisal but will have inspections. Net at closing would be about 2k under best offer.

Our agent was in contact with all the other agents prior to offers and everyone is aware that there would most likely be multiple offers coming and have given what we believe to be their best offer. WIthout getting into negotiating a better deal can I get some opinions on what we already have on the table? Cash buyer vs a little extra money and a finanaced buyer.

One other note we believe we are hitting the ceiling for what our house will appraise for, so that seems to be another adavantage to the cash buyer. Let me know your opinions please. People have been moving into our area from Chicago. We are just across the state line and taxes are much lower. Our house has easy access to the highway so we new it would be hot but this is insane. I don't have official pics to post yet but here are some screen shots of the listing.

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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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  • Fred Schonfeld
    Real Estate Investor · Hartford, CT · Member since 2016 · 12 posts · 2 votes
    9y
    Definitely take the cash offer. That's what I would do with a doubt.
    1Reply
  • Jed Slaughter
    Residential Real Estate Broker · Naperville, IL · Member since 2016 · 7 posts · 1 vote
    9y
    Cash offer, if I was your agent I would negotiate and say we'll split the difference from the best offer. The cash offer was 2k under we have a deal if you come up a grand. Even if they don't bite I'd still do that offer. The best offer is always the offer with the fewest number of contingencies, so many things can ruin a deal. Cash is king.
    1Reply
  • Bart H.
    Dallas, TX · Member since 2016 · 1k+ posts · 745 votes
    9y

    I think I would work the all cash offer, tell them there are other offers and counter with a little higher price.  Say $5K over what they offered, with the idea of settling at +$2.5K.

    If you really are at the top of the market, you run the real chance that higher offers that require financing will require the buyer to come in with additional cash. Since they are FHA offers, there is a real chance that the buyers wouldnt have additional money for closing.

    Plus even if you end up giving up $2K for a cash, you are getting out of the deal a month or so faster than a financed deal, so your time value of money actually makes the cash offer closer.

    I dont think I would string out the process and run the risk of losing your cash buyer.

    0Reply
  • Keenan Gladd-Brown
    Baltimore, MD · Member since 2016 · 7 posts · 2 votes
    9y
    This is coming from someone that knows very little about applied real estate journeys, only from what I have read in books/ being a psychology major...my suggestion is you know how much work you have put into your home. Go with the offer you feel fairly represents the amount of energy and time you spent putting work into your home. Then go from there in your negotiations. Best of luck this seems like a good dilema to be in!
    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    In this business you have two options, fast and quick, take what is offered or negotiate the absolute highest price in a hot market. Fast and quick is for those risk adverse having no negotiating skills. The rest of us work every deal to realise the bigger returns. No offer is final except mine.

    The advantage in selling a personal home is you are dealing with a emotional decision on the part of a buyer. Emotions are something which can easily be taken advantage of and manipulated. When you know they want the place you take advantage of their weakness. It means some risk and some work but that is what makes it fun.

    0Reply
  • Ed S.
    Investor · Oskaloosa, IA · Member since 2014 · 126 posts · 65 votes
    9y
    Great thread to read! I love this site to gain onsite and knowledge. Maybe it was in your comments, if you have debt you have a carrying costs, along with R/E taxes, insurance. I'm a cash guy. Option one: 3% down FHA Option two: 100 % down cash Great problem to have. Short sale sucks!
    1Reply
  • Patrick Connell
    REALTOR® · Bastrop, TX · Member since 2013 · 324 posts · 191 votes
    9y
    Greg S. that's about the most ignorant generalization of investors that I've read in quite awhile, second only to Natalie Vane bashing agents with even worse generalizations.
    0Reply
  • Joel Florek
    Rental Property Investor · Michigan City, IN · Member since 2015 · 530 posts · 741 votes
    9y
    Go cash as it is likely an easy close. Counter back to see what else you can get from them to get the few extra bucks. FHA can fall through because of so much red tape. Best to avoid red tape as much as possible especially if you are talking about 3% lower cashflow.
    1Reply
  • Jon Graham
    OP
    Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes
    9y
    Originally posted by @Thomas S.:

    In this business you have two options, fast and quick, take what is offered or negotiate the absolute highest price in a hot market. Fast and quick is for those risk adverse having no negotiating skills. The rest of us work every deal to realise the bigger returns. No offer is final except mine.

    The advantage in selling a personal home is you are dealing with a emotional decision on the part of a buyer. Emotions are something which can easily be taken advantage of and manipulated. When you know they want the place you take advantage of their weakness. It means some risk and some work but that is what makes it fun.

    What are you talking about LOL. You obviously still didn't even read my original question anyway...

    0Reply
  • Jon Graham
    OP
    Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes
    9y
    Originally posted by @Ed S.:

    Great thread to read!

    I love this site to gain onsite and knowledge.

    Maybe it was in your comments, if you have debt you have a carrying costs, along with R/E taxes, insurance.

    I'm a cash guy.

    Option one: 3% down FHA
    Option two: 100 % down cash

    Great problem to have.

    Short sale sucks!

    I do have a mortgage. Taxes and everything is about 850 a month so that would def be a consideration. I had enough good intrest it hopefully doesn't factor in on this one. 

    0Reply
  • Kyle Nelson
    Polson, MT · Member since 2017 · 115 posts · 105 votes
    9y
    Do the cash deal, every day you own the property it costs you more money. If the cash deal is equal in gross sale price(for you) then the quicker you sell the higher your net profit will be. I'm a newbie so I could be way off but hey, I like to at least pretend I'm smart on the internet. I'd like to hear reasons I'm wrong. (For education's sake only)
    1Reply
  • Jon Graham
    OP
    Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes
    9y

    Thanks everyone on the feedback. This has been a great discussion. Trending number one on BP right now. I did accept the cash offer. I'll give my reasons and feel free to give me more feedback if you like or comments about the original question. 

    1. All the realtors involved were aware of the great amount of intrest and multiple offers, so buyers all came in with their best offers out of the gate. 

    2. My realtor and I are very knowledgeable about our local market and we are already in a price range that would be a risk of not appraising. So, higher offers would only really be a benefit if they were cash.

    3. Cash offers in our market are pretty rare so chances of a second are slim

    4. The cash offer I got was expiring soon and we didn't want to risk this buyer walking. 

    It was a great offer and we made great money on the deal. More than I anticipated because of the multiple buyers. I have a 2 week old baby so the stress free selling process will be refreshing as well. 

    Thanks again for all the responses. 

    1Reply
  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
    9y

    @Jon Graham Double congrats then! On the contract and the baby! And from those few pictures, the home looks amazing. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Thomas S. is correct in this situation take the cash and be on your way. I know Greg your a smart dude so I wont insult you in explaining why in the US a FHA offer is not one to take over a cash offer even if its a few bucks light.

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  • Edmund Chiang
    Oakland Gardens, NY · Member since 2016 · 19 posts · 13 votes
    9y

    I've been a Residential/Commercial/FHA appraiser for over 15 years. Your house looks great but sometimes issues might arise that would prevent it from being FHA insured. Sometimes those issues can be remedied but it might be costly in money and time. The second point is that you are on the top of your market and therefore really depends on the appraiser doing the appraisal. He might be generous and give you a nice value or he might come in several thousand lower. It all depends on the AMC that has hired the appraiser and also if the appraiser has been reprimanded or fined recently and may come in more conservatively. Another issue to consider is that the value is going to be very high due to a bidding war which may not be substantiated with recent sales. Even the most recent sales are about 3 month delayed due to closing time and therefore in a rising market can mean the difference between a property appraising at value or below value. I personally go with the cash offer. The financing deal even though is higher in value has a certain degree of risk in it. Also if you close lets say a month or two earlier doesn't that constitute mortgage/tax/insurance/utilities savings or at the very least opportunity cost for other ventures?

    1Reply
  • Letitia Harris
    Flipper/Rehabber · Ahwahnee, CA · Member since 2014 · 95 posts · 26 votes
    9y

    Take the cash!   It's fast,  a sure thing.    You have no idea where your house will appraise.   Comps can kick your butt if you've overimproved for the area.

    Please keep us posted!   I dream of having that mythical bidding war for one of my flips... 

    Oops,  I didn't see the 2nd page and your post where you took the cash.   Congrats!! 

    1Reply
  • Michael H.
    Investor · Kansas City, MO · Member since 2016 · 130 posts · 64 votes
    9y
    I'd ask #1 and # 2 to waive the appraisal contingency and buy and allow a courtesy inspection. If neither will do that I'd go with the cash offer. Better to close the deal with a net 69 than risk it falling apart and possibly have to putting it back on the market and get even less.
    0Reply
  • Ron Dayley
    Clarksville, TN · Member since 2016 · 238 posts · 96 votes
    9y
    The cash deal is easiest. The others are contingent on inspection and/or final loan approval. I'd take the cash and be happy with the $69k.
    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    @Jay Hinrichs

    @Jay HinrichsDon't worry about insulting me, I am always interested in learning. In Canada we have offers conditional on financing that often fall through, Banks will not always value as high as the offer price and the financing fails. I assumed the FHA is the same principal but would be interested in learning the differences.

    It is often difficult to provide advice if my base understanding is different from the environment in question. Simply makes me look like an idiot, not that I care what others think, but still nice to know what I am talking about. 

    I have read through the FHA requirements on line and on the surface it appears that almost anyone with a pulse can qualify. It looks like a second chance option to those with a proven track record of having zero money management skills.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Thomas S. exactly FHA loan has a far greater chance of a sale fail than a cash deal.. and this depends on what part of the country.. out our way they are pretty solid.. but when you get into some other areas of the country were credit is a challenge these will fall apart quite frequently. Ergo smart money usually will take a little less for cash.. by the time you have a sale fail and have to remarket it you lose more than the lower cash offer many times.

    and the sale fail usually comes in the last week before closing  ( settlement)

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y
    2Originally posted by @Jay Hinrichs:

    @Thomas S. is correct in this situation take the cash and be on your way. I know Greg your a smart dude so I wont insult you in explaining why in the US a FHA offer is not one to take over a cash offer even if its a few bucks light.

    Yeah sometimes these things are so ingrained that I dont even remember to point out whats obvious to me and guys like @Jay Hinrichs. With the FHA loan you are looking at a few factors. First there is the termite inspection. Unless this property is in the city and surrounded by concrete...there is always evidence of termites, and that is typically treated and paid for by the seller, at least where I do business. So thats between $500 to $1500 if they are just doing their spray thing. Then there will be the lender required repairs. No hand railing on those 3 steps leading up to the door...got to install the hand railing. Chipping and flaking paint, thats got to be taken care of. Then there is the fact that because someone using an FHA loan is likely to be a first time home buyer, they have a higher chance of freaking out from a home inspection, or a higher chance of their financing falling through because they are a marginal borrower.

    Usually about $5k is the premium where I will take, and suggest my clients take th FHA (or VA) over a conventional or cash offer. $3k, when you are giving back some of that money to the termite and repairs, might not do it for me when that $3k turns into in reality $1500. Ive seen plenty of instances when $5k premium isnt enough to get the deal done though.

    I will say too it depends a lot on who the agent is on the side of the deal.  Is it an agent I know who closes deals, who has their clients prepared for the process and sets proper expectations, and who makes sure their client uses reputable lenders who can close the deal....or is it some agent Ive never heard of.  All that goes to the strength or weakness of the offer....probably even more so than the money.

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  • Rolanda Eldridge
    Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes
    9y

    Cash will keep you moving..You can close quickly and no problem with financing contingencies...Also consider back up contract...

    0Reply
  • Cooper Bert
    Harrisburg, PA · Member since 2015 · 43 posts · 52 votes
    9y
    Originally posted by @Russell Brazil:

    I totally agree that most who have been in the REI game for awhile automatically assume that FHA financing brings issues that are at minimum a nuisance and potentially kill a deal after tying up the property for a long period of marketable time. FHA inspections typically result in "nippler" negotiations where every little item that needs addressed nibbles away at the net proceeds of the sale. Like the proverbial Chinese water torture, the drip, drip, drip of profit flowing out of the deal can be maddening.

    Personally, there has to be a significant premium AND a definable & short period of due diligence before I even consider a FHA financing deal. Life is too short...

    1Reply
  • Jon Graham
    OP
    Property Manager · St. John, IN · Member since 2017 · 67 posts · 30 votes
    9y
    Originally posted by @Cooper Bert:
    Originally posted by @Russell Brazil:

    I totally agree that most who have been in the REI game for awhile automatically assume that FHA financing brings issues that are at minimum a nuisance and potentially kill a deal after tying up the property for a long period of marketable time. FHA inspections typically result in "nippler" negotiations where every little item that needs addressed nibbles away at the net proceeds of the sale. Like the proverbial Chinese water torture, the drip, drip, drip of profit flowing out of the deal can be maddening.

    Personally, there has to be a significant premium AND a definable & short period of due diligence before I even consider a FHA financing deal. Life is too short...

     I think auto-correct got you LOL. I'm pretty sure you meant to write 'nibbler' not 'nippler'. I did get s good chuckle out of that though LOL.

    1Reply
  • Cooper Bert
    Harrisburg, PA · Member since 2015 · 43 posts · 52 votes
    9y
    Originally posted by @Jon Graham:

     I think auto-correct got you LOL. I'm pretty sure you meant to write 'nibbler' not 'nippler'. I did get s good chuckle out of that though LOL.

     Sigh....  you are correct.  I guess it could be a Freudian slip of some type associated with my infant years and dear mothers .. eh, never mind.

    At least my "vote" count should go up!

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