When the Highest Price Isn't the Best Offer For Your Home

When the Highest Price Isn't the Best Offer For Your Home.

It may sound strange, but the highest offer on your home isn't always the offer you should accept.

Most homeowners understandably assume that selling a home is simple: Put the home on the market, receive multiple offers, and accept the one with the highest price. Sometimes, that's exactly what happens.

But after representing more than a thousand homeowners, we've learned that price is only one part of an offer. The terms can be just as important, and sometimes even more important than the number at the top of the page.

What Makes One Offer Better Than Another?

Imagine you receive three offers for your home.

One is $50,000 higher than the others, but the buyer needs a loan, has several contingencies and wants a longer escrow.

Another offer is somewhat lower, but the buyer is paying cash, has fewer contingencies and can close quickly.

Which is the better offer? There isn't necessarily a right answer. It depends on what matters most to you as the seller.

Here are three things worth considering.

1. Contingencies

A buyer may write an attractive offer but include contingencies that give them opportunities to renegotiate or cancel the purchase if certain conditions aren't satisfied.

Common contingencies can involve inspections, appraisal, loan approval and, depending on the transaction and contract, obtaining insurance.

Another buyer may offer less money but remove some or all of those contingencies.

That can be meaningful to a seller because fewer contingencies can mean less uncertainty about whether the transaction will actually reach the closing table.

A lower price with fewer conditions may sometimes be more attractive than a higher price with more opportunities for the transaction to change.

2. Timing

The closing date can also affect which offer makes the most sense.

Perhaps one buyer can close in 21 days while another needs 45 days.

If the seller is purchasing another home, relocating or simply wants to complete the move quickly, the shorter escrow may be worth more than the difference in price.

Of course, another seller may need the longer escrow. There is no universally "best" closing timeline. The right timeline is the one that works best for the seller.

3. Cash

An all-cash offer can also reduce uncertainty because the buyer does not need to obtain mortgage financing. There is no loan approval contingency to navigate, and there generally isn't a lender-required appraisal standing between the buyer and the purchase.

That doesn't automatically make a cash offer the best offer. A financed offer may still be considerably stronger depending on its price and other terms.

But when two offers are relatively close, the certainty of a cash purchase can be an important consideration.

Look at the Entire Offer

Consider two hypothetical offers:

Offer A: $2,100,000 with several contingencies and a longer escrow.

Offer B: $2,050,000 with substantially fewer contingencies, a shorter escrow and cash financing.

Offer A has a higher price. But Offer B may provide a level of certainty that is worth considering.

The seller isn't simply choosing between $2,100,000 and $2,050,000. They are choosing between different combinations of price, terms, timing and risk.

That's why comparing offers requires more than lining up the purchase prices in a spreadsheet.

Buyers Should Think About This, Too

The same principle applies when you're buying a home.

When competing for a property, the instinct is often to simply offer more money. But sometimes a buyer can make an offer more compelling by improving the terms rather than only increasing the price.

A thoughtful closing timeline, strong financial position and carefully considered contingencies can give a seller greater confidence in the buyer.

The goal isn't always to be the highest bidder. Sometimes it's to be the buyer whose overall offer makes the most sense to the seller.

The Best Offer Is the One That Fits

The highest price is important. But it isn't the only measure of an offer's value.

For one seller, maximizing the sales price may be the priority. For another, certainty of closing or a particular timeline may matter more. And sometimes, the highest price and the strongest terms come together.

The point isn't that sellers should accept less. It's that they shouldn't assume the highest number automatically represents the best opportunity. Buying or selling a home is too important a decision to reduce to a single number.

Our job isn't to tell you which offer to accept. It's to help you understand the differences between the offers so you can make the decision that is right for you.