Which Offer Will You Accept?
Usually, when you put your house on MLS and show the house to brokers, you’ll receive all types of offers to purchase your house. The biggest difference between the offers is how the potential buyer will finance the house. The offers may be subject to FHA home loans, pre-qualified conventional loans, or all cash. The buyer may be seeking owner financing or rent to own. Which Offer Will You Accept?
The last house I sold was right at the market. We received three offers in two days. All were $5,000 over our asking price. Two were all-cash offers, and one was subject to financing accompanied by a letter from a first-time buyer. The two all-cash offers were subject to the inspection.
In our neighborhood, we have had a lot of cash offers for houses that were demolished and new houses at twice the price were put up. We evaluated the three offers and chose an all-cash offer proffered by a buyer interested in living in the house. We thought that would be what our friends and neighbors would want.
Selling a Home? Which Offer Will You Accept?
- FHA Home Loans. FHA loans are government-backed loans, similar to VA and USDA loans. Buyers seek these loans for low down payments, lower credit requirements, and lower interest rates. The biggest challenge with FHA mortgage loans is the inspection and property approval requirements. If your property isn’t in great shape, this can be a real problem.
- Conventional Loans. Offers contingent on conventional loans, or with conventional loan pre-approvals, may suggest stronger buyer-borrowers. Credit standards and down payment requirements on these loans have been dropping, so being stronger buyers may change to something less than strong buyers. However, these loan programs are not as restrictive on property condition as FHA Home Loans. The property will still need to be livable and free of structural issues.
- Cash Home Buyers. A cash buyer typically offers a quick close often less than 30 days. There is no uncertainty or wait and see gamble. They may or may not purchase the property as-is. Of course, in return for these cash and early closing offers, cash buyers may expect a discount.
- Owner Financing. Mortgage lenders can be tough to work if you have low FICA scores or are self-employed. Seller held mortgages can be highly attractive if you are interested in creating ongoing streams of income, and great returns on capital. Any property repair issues can normally be negotiated, but don’t need to hold up a sale. This is a fast transaction. The downside is that you don’t get all your cash out immediately. It can also be tricky if you still owe money on the property yourself.
- Rent to Own. There are multiple ways to structure a rent to own deal. This is a type of owner financing, yet mainly differs in that the transaction starts as a lease, with the option to buy later on.
Those five types of offers represent the kind of offer you may receive. Selling a Home? Which Offer Will You Accept? Which one you select depends on your goals, time frame, and risk avoidance.
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