The biggest anxiety when selling your home comes from the unknown. Every Tallahassee seller dreams of having multiple offers to choose from for their home. However, it is often more complex than just signing the one with the highest price. Like most big undertakings, it is best to have a negotiation strategy in place before you sell your Tallahassee home! Knowing the risks of accepting one offer over others is important! Let’s talk about the top 5 things Tallahassee sellers should do to prepare for reviewing offers and what 6 things they should evaluate on buyer’s offers.
What are your priorities as a family?
Establishing what is most important to you before the offers come in will help you keep your cool during negotiations. And keeping your anxiety down will help you focus on getting what you want when the other side starts to really annoy you. Harvard Business Review agrees, check out this fascinating article about how emotions can derail negotiations: https://hbr.org/2015/12/emotion-and-the-art-of-negotiation
This is also a conversation to have with your Realtor before you list your home for sale. For many Tallahassee sellers, their proceeds are the most important factor in deciding which offer they accept. Some buyers need to ask the seller to help them cover closing costs and will offer more than the list price to cover the cost to the seller. Some buyers have a loan that will require a ‘clear’ termite report.
Sellers may also consider items besides price. Some sellers want a later closing date or to close as soon as possible. Buyers may request personal items as part of the sale price. Sellers will need to decide how to work with the buyer’s strategy to get the best deal that works for their family.
What is an escalation clause addendum and how is it used in the Tallahassee real estate market?
One of the contract clauses that has become popular with the rise in multiple offers is the escalation clause. While the wording of this clause can vary significantly, they are a promise from the buyer to pay more in certain conditions. The buyer submits an offer and in the escalation clause addendum, they state how much more they agree to pay over another buyer and the top limit of their offer. For example, the Jones’ have offered $325,000 on a home without an escalation clause. The Smith’s offer $320,000 with an escalation clause that they will pay $2,000 more than the next offer up to $335,000.
Often in this situation, the seller will counter and ask for the $335,000 back to the Smiths. Some wording requires that the seller provide copies of the other offers. If this is the case the seller may counter back at $327,000 and include a copy of the Jones’ offer.
In Florida, the seller can share the details of the offers they have received. This is rare in Tallahassee. If you do counter at a higher price, make sure the listing agent puts that higher amount on the first page of the contract. Making the final agreed upon price obvious helps busy appraisers not miss a higher negotiated amount.
What are common contingencies Tallahassee sellers?
The most common contingencies are financing, inspections, and sometimes a sale of the buyer’s home.
The financing contingency places requirements on the buyer to submit a complete application to a lender.
Usually, buyers have five days on most Tallahassee contracts to make that application. Buyers can lost their deposit if they do not make their mortgage application with the deadline. This may result in the seller receiving the earnest money deposit. The buyer can also terminate if the house does not appraise, even if the seller agrees to lower their price. Note here that even if the seller agrees to the lower price of the appraisal, the buyer can still walk away.
The inspection contingency lasts 15 days for most contracts in Tallahassee. The buyer has those two weeks to perform all their due diligence. That usually includes at least the home inspection.
Inspectors are licensed by the state and must pass an exam. The buyer often orders termite and radon inspections as well. The septic system, drain field and well will also be inspected.
Less common is the condition of selling the buyer’s house before closing on their new home. These contracts are often not desirable to the seller because of the numerous unknowns. This is also a contract addendum and most of the time, if the house the sale is contingent on does not sell, the buyer can terminate the contract and get their deposit back.
Because of this, most sellers in Tallahassee do not accept offers from buyers who need to sell their house so they can buy. This is especially if the buyer’s house is not on the market or “under contract” itself yet.
Should Tallahassee sellers accept the ‘perfect’ first offer?
No. The seller does not have to accept any offers. Tallahassee sellers should not feel pressured by their agent to sign either. However, if a contract comes in that offers everything you asked for, sign it. There have been times in Tallahassee when the first offer comes in at the list price with no concessions, but sellers feel that if the first offer was this good, the next one will be even better or there might be several offers. Sellers that hold out for more often end up with less. The buyers often do not want to wait beyond their offer deadline. The Tallahassee real market has belonged to the sellers for years and buyers are fatigued by the whole process. Sellers could end up losing that contract and accepting a less desirable one.
Once a seller accepts an offer, there is no contingency period for them. Tallahassee sellers can be forced to sell in Florida courts. There are times in Tallahassee when a buyer will allow a seller to terminate a contract, but the seller is risking being sued.
Should Tallahassee sellers consider love letters from the buyer?
They should not. Real estate attorneys are advising listing agents to not accept buyer love letters because it puts the seller at risk of violating the Fair Housing Laws. There are seven classes protected from discrimination in the house buying process. If a buyer is in one of those protected classes and does not win the multiple offer situation, they can file a lawsuit alleging discrimination. Those protected classes include family status, color, race, national origin, sex, handicap, and religion. If the buyer’s letter includes clues to any of these protected classes, it could put the seller at risk of defending themselves from discrimination claims. Most listing agents still allow buyers to send Tallahassee sellers their love letters.
What things indicate a strong offer for a home in Tallahassee?
This is another conversation to have with your listing agent. They often have tools and worksheets to share with sellers. These tools help sellers determine which is the best offer for the seller’s situation and priorities.
1. Focus on net proceeds, not just price.
Because buyers often ask for concessions. Concessions are usually either paying closing costs or making repairs. It can be quickly confusing which offer has the best bottom line. Choosing one offer over another because a new roof is not being asked for does not mean that the roof remains off the table. That buyer might not have realized how old the roof is. The insurance company will check. They have gotten more stringent about the age of roofs since Tallahassee real estate was hit by Hurricane Michael in 2018. You may be asked for that roof later in negotiations in order to get to the closing table.
Just because the buyer is asking for closing costs should not automatically make their offer weaker. Buyers will often raise their offer price to cover the costs they are asking them to pay.
The earnest money deposit (EMD) is the money the buyer puts down to show their interest and ability to purchase the home. The title agent holds this money in escrow until the contract closes or terminates. If the contract is executed, or terminated within the deadline, the money belongs to the buyer. If the buyer backs out of the purchase after their inspection period or fails to qualify for the loan, this money goes to the seller. The higher the amount of the earnest money deposit the stronger the buyers. In Tallahassee, the EMD is often somewhere between 1% – 4%. An EMD is not a requirement for an offer. Sellers can agree to any amount or none.
3. Disclosures returned
This is a small thing and could be a sign of the quality of the agent rather than the buyer. But as a listing agent, we love it when the buyer sends all the signed disclosures with their offer. This tells the seller that the buyers have started their due diligence process. Informed buyers feel more comfortable with offering ‘as-is’ contracts too.
Also, if there is an addendum or disclosure incorporated into the contract (see page 9 of the purchase contract), this must be included for a completely executed contract. In some cases, if these addenda are not signed by both parties, the buyer can walk away from the contract up to the day of closing and still receive their binder deposit back. There is less risk for the seller when all disclosures are submitted right away.
4. Type of financing
With the influx of Northerners moving to Florida out of the snow, we have seen more cash sales than in years past. If the buyer is offering cash, it is common for the agent to send a proof of funds letter.
This can be a statement from a bank or a financial consultant. The quality of this letter matters too. Is it in a 401k with hoops to jump through? Is it in a savings account with easy access? The letter must have the buyer’s name and the financial institution clearly visible. We have worked with buyers in the past that do not want to submit their proof of funds until after the seller has signed. In the Tallahassee real estate market, most cash offers include the proof of funds.
Some agents prefer conventional financing over other forms of mortgages since it can be the most difficult for buyers to qualify. VA loans are the golden ticket for our veterans, but they do need a clean wood-destroying organism report. FHA loans are the most common, especially for first-time homebuyers. There are usually fewer conditions the property must meet for conventional financing compared to FHA or USDA loans. Only rural homes qualify for USDA loans. Your listing agent will talk to you about the specific requirements of each and whether your home will meet condition requirements.
There are local lenders that can offer the Tallahassee seller a guarantee for the buyers they have preapproved. Letters that state the buyer has submitted a loan application, or that the application has completed preliminary underwriting is more valuable than a prequalification letter with state income.
In some parts of the state, buyers are waiving inspections or financing contingencies. That feels like the wild west for most Tallahassee Realtors. If there is a contingency for the buyer to sell their house before purchasing, this can be a warning sign for the Tallahassee sellers. We have seen multiple offers fall through days before closing. In one situation, one buyer failing to qualify for a mortgage at the last minute put three other closings in limbo. Not a great place to be.
Often Tallahassee sellers need to find another house before they close on theirs. If a buyer is flexible, this may be worth thousands in price. Some buyers will also offer lease-back options for a limited period to allow the sellers to occupy after closing. To be clear and let everyone know what to expect, write down all details and expectations. Make sure everyone signs it.
You can make counteroffers in a multiple offer situation.
As a seller, you cannot promise to sell your house to more than one buyer. This means you can only negotiate or send a counter offer with one buyer at a time. Be careful with acceptance times and dates, the buyer does not have to extend your time to make a decision.
Remember, once a Tallahassee seller signs the offer it is final and binding!
Under Florida law, you cannot force a buyer to buy! But you can force a seller to sell their real estate! Choose carefully!
You can find more professional information about negotiations on our website here: https://livingintallahassee.com/sellers/multiple-offers.html
Or check out what the National Association of Realtors suggests here: https://www.nar.realtor/about-nar/policies/professional-standards-and-code-of-ethics/a-buyers-and-sellers-guide-to-multiple-offer-negotiations