Estate and mortgageSellers: If You Want It, Ask For It! - Part II
If a seller specifies a list price when putting his house on the market, why not set other minimum requirements for offers and share them with prospective buyers? While this hasn"t been the common practice of most sellers in the past, many are finding it a practical way to sort through the myriad of offers received in order to go with the strongest possible buyer (not to mention reducing anxiety and headaches for potential buyers!)
By the seller noting "Suggested Contract Requirements" on a printed sheet circulated to prospective buyers (or in the body of the real estate agent"s MLS listing information, if space permits) buyers have an idea of minimum requirements and should attempt to meet or exceed them if they plan to compete for the property. Obviously, buyers are free to make any offer regarding the items. Likewise, a seller would be free to accept an offer that didn"t contain the suggested requirements.
In Part I of this article, we covered the merits of specifying loan types and corresponding mortgage costs, as well as earnest money. But even more detrimental to sellers is being non-specific when it comes to the amount of net proceeds they expect at closing.
NET PROCEEDS
Real estate consumers have learned over the decades in purchasing and selling property, that there can be a marked difference between the sales price and net proceeds. If a buyer pays a seller his "list" price, those are gross proceeds. Deducted from the gross will be the costs of sale (commissions, closing fees, etc.) as well as any outstanding liens against the property (like mortgages, property taxes, and any local improvement district charges.) Once these costs are deducted, the remainder is termed the net proceeds. Sometimes the difference between gross and net is slight; but other times, it"s a huge chasm.
That"s why sellers are focusing on and prioritizing what they"ll net. A recent seller I spoke with said, "I told the agent I didn"t care what kind of buyer he brought in, just so I could walk away with $50,000 net in my pocket." The best way to achieve definitive results is to make sure that you (or your real estate agent) estimate your sales costs before listing the property, and that you determine the type of offer (including the type(s) of financing programs) you"ll consider in order to achieve your net proceeds amount.
When an offer is received, request that the buyer (or the agent working with the buyer) provide you with an annotated list of costs you"ll pay as a seller and approximately what you"ll net. If you"re working with a real estate agent, your representative should do his/her own rendition of those costs. Even though this figure may fluctuate a bit before closing, there"s nothing wrong with having the sale"s closing contingent upon your receipt of a certain amount of net proceeds. That way if costs do fluctuate or rise before closing, the buyer will need to pick up the difference if he expects to close the purchase. As seen previously, a seller can always bend a bit if need be when a buyer balks at paying the extra cost. But it"s at the seller"s option, not at the buyer"s mandate.
In Part III of this article, we"ll see how vital it is for sellers to determine which contingencies (if any) they"ll allow in an acceptable contract and which ones they"d be wise to avoid.