You have been preparing for months.
You did everything you could to make your home the best it has ever been.
You decluttered everything, took down all the cute photos of your kid’s, painted,
cleaned, yard work every weekend, and now the home is on the market.
After a few days on the market you get an offer.
It’s a great price, but you what else should you worry about?
Here are the 5 reasons to NOT take that offer
The buyer isn’t qualified
It is great if a buyer wants to pay full price for your home, but how do you know if they can afford it? First, they need to submit a pre-qualification or pre-approval letter with their offer. If they didn’t send it with the offer don’t respond until they have provided it. Keep in mind, that not all financial institution’s pre-qualification letters are created equal. There are online banks that buyers can submit some of their information and it will automatically generate a pre-qualification letter. It is best for your agent or yourself to contact the lender directly and verify they have submitted the proper documents (at a minimum pulled a credit report and received income verification) to the lender.
A pre-approval letter is better than a pre-qualification letter. With a pre-approval the buyer has submitted all their information and it has been underwritten by an bank underwriter. It is always preferred to have a pre-approval whenever possible.
The offer is contingent upon them selling their home
If the buyer has to sale their home, you may not want to take the offer. Your timing and how quickly they can sell their home should be taken into consideration. If their home asking price is reasonable for the area should also be a deciding indicator. For example, if they live in a $350,000 neighborhood, but in order to buy your home they need to sale their home for $450,000. This might not be the right buyer for your home. By waiting for them to sale their home, you may miss out on other potential buyers for yours. You should evaluate all the details of their sale before accepting their offer. We deal with these offers all the time, and most work out. However, we always do our homework first on the entire situation.
Not enough earnest money
Earnest money is what buyers put down to show they are serious about buying a home. Earnest money can become liquidated damages if the buyer backs out. Most contracts have contingencies for retaining a buyer’s earnest money, like home inspections and financing. However, if the buyer simply decides to not buy the home after those contingencies are met, the seller can take the earnest money as damages. In most cases earnest money is not left to forfeit, but if it is, the more the better. There isn’t a specific amount that is an official standard, but we generally see around 1% of the sales price as a fair amount.
Long closing or contingency dates
These days most homes close within 30-45 days. My wife and I sold our first home before we were agents, and the buyer had a 60 day close. The buyers wanted to close at the start of the school year. We took their offer and after 58 days they backed out. We wasted an entire summer “off market” waiting for their closing date. In the end, we took an offer $10,000 less than the first, a few weeks after putting it back on the market.
Unreasonable inclusions or repair requests
Sometimes offers come in and the buyer wants to include some personal items. Maybe you have a desk that fits a space perfectly, or a nice hot tub in the back yard. These items can be included in the purchase if you don’t want/need the hot tub or desk. However, if they want the kitchen table, living room sofa, and the family dog, you may want to reconsider their offer. Sometimes buyers feel like they need to have everything “upgraded”, especially if the home you are selling is older. As a seller you don’t need to “upgrade” your home if it is priced correctly.
At the end of the day the buyer and seller need to agree on price and terms. We recommend you think of the big picture and ultimately consider your goals. If you have any questions about buying or selling a home, please feel free to email or call us anytime.
Want to remodel that vintage home?
How much ‘fixing’ are you really prepared to do? The romanticism behind reinvigorating the forgotten can be for some an insatiable lust. We would know. We have bought and remodeled 20 homes in the last 15 years. Now most of these homes were “flips” but a few of them were labors of love that we lived in for years. The majority of these fixers were built between 1920 and 1960, with a few newer duplexes mixed in for good measure. The biggest exception to that would be our most recent home being our oldest, built in 1912. It took the entire summer and some of the fall of 2016 for the major renovations, but here we are in summer of 2017 and still making changes. This one falls under the labor of love category. Read more about it in our upcoming book 19 Houses, coming out this fall!
When buying any home you should always make sure to do your due diligence and get all the inspections you need and make sure you’re ready for this massive investment. For older homes, unless they’ve already been renovated, inspections are more of a starting point or just a good idea as to what you’re about to dive into. Usually it’s not so much as to “if” it breaks, as “when” it breaks or “how many times has it already been fixed.” When you buy an older home you normally get older technology, appliances, fixtures, and so on. Our 1912 home came with a few big surprises that required a decent amount of time and money to deal with. When your home is over 100 be prepared. Even though the headaches and late nights tend to lead to gray hairs in the end we love to remodel. It’s just one of those Love / Hate relationships.
Now, I’m not saying “don’t buy that old house” (unless I want it, then yea you don’t want that one, it’s ugly), I would just recommend being well prepared.
Here are 5 Tips to get started:
#1 Have a large contingency plan in your budget. Once you start making small changes, they can turn into large changes quickly. We usually estimate all the known costs and add 30% for things we don’t know about.
#2 Hire the right people. (our vendor list) Contractors come in many shapes, sizes, and experience. Many contractors may say they understand old homes, but they don’t. Ask for references and examples and hopefully pictures of their work. Keep in mind, that the best contractor for your project may not be the least or most expensive. Get multiple bids, and let them know you are getting multiple bids.
#3 Styles change, be prepared. It might be trendy to have a red kitchen cabinets (it’s not by the way), but will it stand the test of time? If you decide to go with current trends be prepared to change it in the next 5-10 years. We always try to add a bit of modern style with the classic looks that will stand the test of time. For example, our new kitchen has very modern blue glass tile backsplash with a classic style of cabinets. When, not if, the tile goes out of style we can replace it for a few hundred dollars. The cabinets, not so easy to replace.
#4 Fix it right not cheap. Sure, it can be less expensive to replace only part of the plumbing, but that doesn’t mean you should. Some things are best to fix it all upfront rather than just in pieces. Plumbing is a good example. You remodel the kitchen, but only replace part of the plumbing. At some point, the old pipes will burst and ruin your new kitchen. It may cost a few hundred to a few thousand dollars (depending on the house) extra to replace the pipes when your kitchen is gutted. Now, since you cheaped out you get to replace the plumbing, kitchen floor, and possibly your cabinets.
#5 Start up and work down. It is really tempting to start painting and getting your new appliances. Don’t do it, don’t give in. This isn’t HGTV. Start your remodel with the roof (if needed) and work your way down. After up to down, work inside out. Meaning, replace what needs to be replaced inside the walls. This could be structural fixes, plumbing, wiring etc. Then, you can start to put it all back together. If you are doing a kitchen, the very last thing you do is the appliances. If they are on the site before it is finished, they are always in the way and become tool storage for contractors. We had a worker drop a huge drill on our stove and completely destroy the control mechanism. That was a $350 lesson.
The list really goes on and there many blogs (more on our blog as well) , books, shows and articles that you can research to better prepare yourself. We will soon release a book of our own that dives further into our homebuyer experiences but until then, give us a call or send us an email if you have any questions or just want to know more.