As the weather continues to rise, as do the number of buyers looking to purchase their new home. With such low inventory in Pitt County, the home buying market is extremely competitive. Currently, there are not enough quality homes on the market for the number of buyers ready to place an offer. Many sellers might find themselves in a multi-offer situation. If that occurs, which offer is best? This week, we will be giving a brief overview of the types of offers that sellers might receive.

 

Most home purchasers do not have a surplus of $100,000 in their bank account ready to buy outright (It is shocking, we know). Most home buyers also can not afford to hold two mortgages at the same time. Buyers that must sell in order to qualify for a new mortgage are still able to put offers in on homes before their own house sells. These types of offers are known as “Contingent Offers.” This offer is contingent on the sale of the buyer’s previous house.

 

While contingent offers are popular, they might not be the best choice for a seller. Those who have sold homes previously know that qualifying for a loan and being approved for a loan are two separate ideas. The loan process is extensive and typically takes anywhere from twenty-seven to forty-five days to receive final approval. Banks are constantly checking employment, checking and savings accounts, and credit throughout the loan approval process. In short, there are a lot of issues that can arise during this time. For a seller, it is stressful enough waiting for one loan to process, let alone two loans to process. Sellers who accept contingent offers are also placing their faith in the hands of their buyer’s buyer. What happens if the sale of the buyer’s home gets delayed? What if the buyers for the seller’s buyer’s home does not get approved? Or, what if the buyers for the seller’s buyer’s home terminates the contract? A contingent offer adds even more moving pieces to the transaction. A seller might want to consult with their agent before deciding on a contingent offer.

 

Next, sellers might be lucky enough to receive a cash offer. In a blog post from Economists’ Outlook, in coordination with the National Association of REALTORS® (NAR), it is written that IN 2017, twenty-one percent of buyers were cash sales. Most cash buyers offer cash in attempts to get a lower price than market value. There are many positives to cash offers. First, sellers will not have to worry about this buyer completing the loan process. Next, since cash buyers are not financing, they can also close on the home sooner. Typically, cash sales are completed within fourteen days. Compared to financing, that is half the time. However, cash offers do not always win the bidding wars. Sometimes, sellers may find it more lucrative to wait the extra time to receive the price they prefer. Sellers should be aware that there is much that can go awry during the loan process. Accepting an offer that is using financing is more of a gamble than accepting a possibly lower cash offer. Again, sellers should look to the advice of their real estate professional.

 

Buyers that need to finance, but do not have to sell an existing home to qualify, are simply normal offers. However, there are different types of loans that could affect the seller. If a buyer is using a conventional home loan, then the buyer must pay at least five percent of the purchase price as their down payment. Buyers that utilize a conventional home loan are typically looking to pay more of a down payment. Once a buyer gets twenty percent of the loan paid off, they no longer must pay monthly private mortgage insurance or PMI. Sellers can find this comforting, knowing that the buyer is staking more of their money as a down payment. A buyer that elects to use a USDA home loan is not required to pay a down payment, as it is a one-hundred percent financing loan. This could scare some sellers since the buyer does not have to stake any money out of pocket to purchase. An FHA home loan requires a down payment of three and a half percent but is subject to an FHA appraisal. A VA loan is for our nation’s veterans. Veterans using their VA eligibility for a VA mortgage do not have a down payment and are also contingent upon a VA appraisal. A seller’s REALTOR ® will be able to relay the pros and cons of each type of loan with their client.

 

At Tyre Realty Group, our distinguished seller’s agents aim to ensure our sellers that they understand each type of offer fully. Selecting the correct offer is an important decision. Our seller’s agents guide our clients through the different types of offers. If you are thinking about listing your home and need assistance, please call us at (252) 758-HOME or stop by our office Monday through Friday, 8:30 AM – 5:30 PM at 505 Red Banks Boulevard Suite E, Greenville, NC 27858.