Negotiating is more than simply agreeing on a price. There are other considerations. When negotiating an offer, the price is more than likely the one thing everyone is focused on. The other points are of some importance too so let’s touch on those.
The source of financing is something that matters too. Who, or what company or bank, is financing your buyers purchase. Where the money is coming from is something I always pay attention to. If it’s a mortgage company or bank I have had problems with in the past I’ll let my client know, along with my opinion.
You want a reputable company or bank. At the very least one you’ve heard of or can research. Check any comments and/or reviews you can find online.
You’re allowed to call the lender and question them. They’re not allowed to give you personal information about the buyer but you can ask. You’ll get a sense or a feeling from speaking with the loan officer.
- Is this a solid buyer?
- Do you foresee any problems?
- Can you give me any guarantees this loan will go through?
When you go into contract your house gets pulled off the market. You want to be sure, or as sure as you can, that your deal is going to close. That your buyer is going to make it to the closing table.
- Earnest Money
Earnest money is a “good faith” deposit not to be confused with a down payment. At closing the earnest money will be applied to the buyers down payment or closing costs. What is the amount of earnest money you will accept? The more the better. Earnest money shows the buyer is serious and he/she is not going to back out. If they do for no good reason they lose the earnest money and the seller keeps it.
Around here we generally ask for $500-$1000. Our average price point in Wichita KS in 2018 is $140,000. I would recommend as a FSBO to ask for 1-3 percent of the contract price.
Most contracts have contingencies built in how buyers can get earnest back . The definition of contingency is occurring or existing only if or subject to change. A contract may be contingent on the buyer successfully obtaining financing or inspections. These are the potential reasons a buyer may have earnest money refunded.
- Financing falls through.
- Parties can not come to agreement over requested repairs as a result of a home inspection.
- Death in immediate family.
- House doesn’t appraise at contract price.
- Job loss.
All state contracts are different and have their own rules and clauses about contingencies. Be sure and understand yours. In a strong seller’s market it may be prudent to write earnest money non-refundable into the contract. A buyer willing to sign a contract like that is confident about his/her ability to obtain financing.