What happens when you get an offer on your property?
FSBO in Gladwin Michigan?
What Is The Procedure For Negotiating?
If you're new to real estate, the negotiating process may seem arcane. However, it's actually
well thought out and when handled correctly, is effective and protects both buyer and seller.
Negotiation begins when the buyer makes a written offer. An earnest money deposit should
accompany the offer, demonstrating that the buyer is serious.
If the offer is for less than your asking price, you have three choices:
You can accept the offer exactly as proposed. If you do, you've just sold your home!
Or, you can reject the offer outright, in which case your home is still for sale.
Or, you can reject the offer and counter with an offer of your own, called the "counteroffer."
It's important to understand that, contrary to what most sellers would like to do, you cannot
both accept and counter an offer.
What Is A Counter Offer?
A Counteroffer is your offer back to the buyer. Usually, but not always, it's for a compromise
price somewhere in between what you were originally asking and what the buyer originally
offered. Or, it could be for the buyer's price, but terms different than what the buyer offered.
When you reject the buyer's original offer and make a Counteroffer, it's very important to
understand that you may be tossing away a potential deal. The buyer is under no obligation
to accept your Counteroffer. Rather, he or she can simply walk away with the deposit and no
regrets or penalties. You should not counter a buyer's offer unless you are prepared to lose
Your Counteroffer is open to the same possibilities from the buyer's side as the buyer's
original offer was open to you. The buyer can accept, reject or counter your counter. The
same rules apply. The buyer cannot both accept and counter your Counteroffer. This
protects you from having a buyer accept what you've offered and then, for example, add a
clause lowering the price. The buyer's new Counteroffer is a brand new offer to you.
This countering can go back and forth many times until either agreement is reached, or no
agreement is possible and both parties simply back away from the deal.
At any time, you can withdraw a Counteroffer, providing you haven't been informed that the
buyer has signed it. The same rule holds true for the buyer - he or she can withdraw any
offer made prior to communication of your acceptance.
Although the process may seem confusing, actually it works quite well, particularly when it is
well-oiled by the competent back-and-forth help of real estate professionals.
What Happens to the Deposit?
Until there is complete agreement, the deposit belongs to the buyer. The moment both buyer
and seller agree on price and terms, however, the deposit belongs to you, the seller. In
actual practice, however, buyers are loath to give sellers the deposit. The reason is that if for
some reason (not the fault of the buyer) the deal is not completed, it could be difficult getting
the deposit back from the seller. A recalcitrant seller might simply refuse to give it back, or
worse, spend it and not have it to give back!
For this reason, most buyers wisely insist that the deposit be held by a neutral third party
until the sale is consummated, usually in escrow or an agent's fiduciary account.
Should I Accept The Buyer's Offer...Or Counter?
Before making this important decision, you should consult with your agent and, perhaps, with
your attorney. The wrong move could cost you money... or lose the deal.
Ask yourself these questions:
Â· How desperate are you to sell? If you must sell, then you simply may not be willing to risk
Â· How bad is the offer? Many times buyers will "low-ball" or come in at a very low price. You
don't know for sure, but they may very well be expecting you to counter higher. Not doing so
might mean you're agreeing to sell for too little.
Â· How strong is the market? If you lose this buyer and this deal, is the market sufficiently
strong that another buyer/deal will likely soon come along?
Â· Can you live with the terms? The buyers may have inserted a contingency that makes the
sale improbable. For example, they may be insisting that your sale be contingent upon them
selling their existing house. If their old house doesn't sell, they aren't committed to buying
your house. In a strong market with lots of buyers, you might want to counter by removing
this contingency or by giving a short time limit for them to sell their old home.
An agent can be very helpful in explaining your options to you as well as framing the various
counteroffers you might want to make.
What Happens During Closing?
There are many things that must be accomplished before the escrow can be closed. They
include the following:
Â· All purchase contingencies must be removed. This usually includes having the buyers
approve a disclosure statement you provide, approve an inspection report they order (and
pay for) as well as having them remove any other contingency they have holding up the sale.
Â· Property title must be cleared. That means you may need to remove any liens or
encumbrances (such as judgments that may have arisen from a failure to pay a debt) or
other items that "cloud" or restrict your title.
Â· There must be termite clearance. Required in most sales involving a mortgage, this
means you will need to order an inspection, do any required repairs or treatment and get the
written clearance to escrow.
Â· Any prearranged work must be finished. This includes such things as repairing a roof or
repainting a portion of the home. All work agreed upon between you and the buyer must be
Â· All ends must be tied. Any other task required to close escrow must be accomplished.
It's important to have someone in charge, tracking all of the things that need to be done and
seeing they are accomplished in a timely fashion. You can do this, or your real estate agent
can do it for you. The escrow officer cannot normally be relied upon to do all of this work.
If no one keeps track, something critical may not get done in a timely fashion and the deal
could fall through.
What If There Is A Problem?
It's rare that closing an escrow will have no problems at all. You can almost always count on
at least a few things cropping up. What's important is that you learn about the problem as
soon as possible and then take appropriate steps to correct it.
For example, some repair work that you need to do involves removing moldy flooring in a
bathroom. You have the work started immediately. Later it's discovered that the damage is
more extensive than originally thought and it will take longer than anticipated to complete.
Because you started early, you still have time to finish it and close escrow by the agreed
upon date. If you had waited, things might not have turned out as well. Moving quickly is the
key to successful closings.
Additionally, you will want to carefully track the buyer's attempts to get financing. If the buyer
cannot get a needed mortgage, the deal probably cannot be completed. You want to learn
about a buyer's difficulty in getting financing early on, so you can take steps to get your
home back on the market as quickly as possible. Selling to a buyer who has been
"pre-approved" by an institutional lender helps to avoid this problem.