Understanding Purchase Offers

When an offer comes in on your home, the price is just one piece of the puzzle. Understanding all the terms helps you evaluate offers and negotiate effectively.

Key Components of an Offer

Purchase Price

The obvious one—what the buyer is offering to pay. But remember, this isn't necessarily what you'll net at closing.

Earnest Money Deposit

The "good faith" deposit the buyer puts down to show they're serious. Typically 1-3% of the purchase price. More earnest money suggests a more committed buyer.

Financing Terms

How is the buyer paying?

• Cash: No financing contingency, faster close possible
• Conventional loan: Standard mortgage, usually requires less strict property conditions
• FHA loan: Government-backed, may have stricter property requirements
• VA loan: For eligible veterans, no down payment required, specific appraisal requirements

The financing type affects timeline, certainty of closing, and potential hurdles.

Down Payment

A larger down payment generally means a stronger buyer and more financing certainty. A buyer putting 20% down is usually less risky than one putting 3% down.

Contingencies

Conditions that must be met for the sale to proceed:

Inspection contingency: Buyer can inspect and potentially renegotiate or cancel based on findings.

Financing contingency: Sale depends on buyer obtaining loan approval.

Appraisal contingency: Sale depends on home appraising at or above the purchase price.

Sale of buyer's home contingency: Buyer must sell their current home first—adds uncertainty.

Fewer contingencies = stronger offer, but buyers have legitimate reasons for wanting protection.

Closing Timeline

How quickly does the buyer want to close? This might align with your needs or not. A cash buyer might close in two weeks; a financed buyer typically needs 30-45 days.

Possession Date

When do you need to be out? This might be at closing, or you might negotiate a rent-back period if you need more time.

Beyond the Terms

Buyer's Lender

Is the buyer pre-approved (good) or just pre-qualified (weaker)? Who is their lender? Local lenders familiar with the area can sometimes navigate issues more smoothly.

Buyer's Agent

An experienced agent on the other side can actually be helpful—they know how to navigate issues and keep transactions on track.

Buyer's Motivation

Why does this buyer want your home? Understanding their motivation can help in negotiations.

Evaluating Multiple Offers

When you have multiple offers, create a side-by-side comparison considering:

1. Net proceeds (price minus requested concessions)
2. Certainty of closing
3. Timeline alignment
4. Contingency risk
5. Overall strength of buyer

The highest price isn't always the best offer if it comes with more risk or doesn't meet your needs.

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Have an offer to evaluate? Contact Greg Franklin or call (559) 816-7780 to discuss your options.