When it comes to selling your house, you would think it’s pretty easy to decide which offer is the right one to accept – it’s the highest one.
Or is it?
Closing dates have returned to the Scottish property market with a vengeance, driven by strong demand coupled with a shortage of property for sale. Anyone selling their home today should not be surprised to find that several offers have been submitted by the closing date deadline. It’s not inevitable, but it’s certainly possible and even likely in these pandemic times if you have a property with a garden.
As the seller, you have to decide which of these offers you want to accept. It may be counter-intuitive, but it’s not always the case that the highest offer is the best one. Even a great offer is of no value if it falls through, so the situation of the prospective buyer is key.
Firstly, does the buyer submitting the highest offer have a property to sell before they can buy your home? Almost certainly the biggest risk to a successful sale is that the buyer finds it more difficult to sell their existing home than expected or it achieves a lower sale price than expected. If either of those happen, the buyer might have to pull out of the sale entirely or revise their offer downwards, often at the last minute when it is difficult to find another buyer ready and willing to step in.
An offer from a cash buyer, in contrast, carries no such risk. Quite often, offers from cash buyers are lower than those from buyers with a house to sell for exactly that reason, but if the difference in price between the two is not huge, the lower cash offer can be more attractive exactly because it is more likely to go through.
Secondly, if none of the offers are from cash buyers, or if the best offer from a cash buyer is so low that it is worth accepting the risk that a higher offer might fall through, which of the prospective buyers with a home to sell is best placed to buy your property?
Have any of the buyers, for example, already got their home on the market? If the answer is yes, that could make their offer that much more attractive. It means that they should have a pretty good idea of the demand for their property which, in turn, means that their offer is based on a realistic assessment of the resources they will have available to them. And, of course, it also means that they should be able to move sooner because there is no delay while they put their home on the market.
If none of your buyers have their property on the market yet, where is the property they need to sell? An offer from someone living in a desirable area which is always in high demand is likely to be more attractive than an offer from a buyer in a less popular area – even if the latter offer is slightly higher. At least you know that a buyer with a property in a sought-after location will have little difficulty selling their existing home.
Thirdly, will all of your buyers need a mortgage? While lenders will issue an ‘offer in principle’ based on a prospective buyer’s circumstances, that is not a guarantee that they will lend on a specific property. The bank will want to look at the property valuation, the amount of the offer and at any repairs that the Home Report might flag up before committing to lend on that property. It is rare, but lenders can, and have, said no, so an offer from a buyer whose mortgage application is more likely to be approved is generally more attractive than an offer from a buyer at the limits of their financial resources.
Finally, there’s the question of timing. A high offer might look great, but if the buyer wants to move in months from now and you want to move quickly to secure your next home, then it is hardly helpful. Conversely, if a buyer wants to move in as soon as possible and you are waiting for your next home to be completed, that can create tension which might risk the sale – especially if completion of your next home is delayed for a while. In general, it is far better to accept an offer where you and the buyer are broadly in agreement on timing, and you will find that many buyers will adjust their timing in the hope of making their offer more attractive to you.
You may be asking, of course, how do I find out all this about these buyers? The answer is; you don’t, but your solicitor does. As part of their pre-qualifying of buyers, your solicitor will work to find out as much as possible about the circumstances of every prospective buyer. When the time comes to consider the offers that have been submitted, your solicitor should have enough information about each buyer to guide you through the advantages of each one.
For advice on selling your house and what offer you should accept, get in touch with one of our specialist conveyancing solicitors today.