Sellers- Advanced Multiple Offer Situations

Having multiple offers on the house is a wonderful thing for a seller. The outcome is often better, and the price is typically higher. But there are other terms that can greatly influence each buyer's offer on your home.

Escalation Clauses:

In the height of a seller’s market we commonly see escalation clauses. This clause means that the buyer will pay more than any other offer up to a certain amount. For example, an escalation clause on a $500,000 house would state “buyer will pay $5,000 more than any other offer up to a maximum of $575,000.” if there were six offers, and the highest one was $560,000, this would push this particular buyer up to $565,000.

No inspection:

This is exactly what the name implies. No inspection. The reason this is so powerful is that the offer price is the final price. When buyers have inspections, usually defects are found, and they might end up asking for a reduction in price to accommodate that defect. For instance if the air conditioning isn’t functioning any more, they may ask for a new air conditioner, or a price change of $7000. With no inspection, there is not the opportunity to negotiate the price any more.

Limited Scope Inspection:

A limited scope inspection is where a buyer can perform a full home inspection, but will be limited to only asking for an adjustment if there are items that require repair of a specific amount or higher, such as $5000 or higher. This is to allow the buyer to negotiate, or back out if there are MAJOR things wrong with the house that they are not prepared for. For instance, if they find out the sewer line is in need of replacement to the tune of $15,000, they could negotiate that since the sewer line will have to be fixed by someone. If they walk away, know that the next buyer may come up with the same problem if they have an inspection.

Non-contingent offers:

In a strong seller’s market buyers are offering to purchase your house without the contingency of the sale of their house.

Cash Offers:

Cash is king or queen, especially in multiple offers. When people are routinely making offers $50,000 to $100,000 higher than list price, there's a chance that the appraisal might come back lower than the offer price.  Cash offers have no appraisal so the risk of the deal falling apart due to lack of funds vanishes. There is value in this compared to an offer with a financing contingency.

Appraisal Gap coverage:

An appraisal gap clause is something we see a lot of in a strong sellers market.  This clause says that if the appraisal comes in lower than the sale price, the buyer will cover the difference in cash to satisfy to loan process. An example is as follows:

“buyer cover an appraisal gap shortfall of up to $25,000.”

In this example if a house sold for $675,000 and the appraisal came back at $650,000, the buyer would be responsible for paying the difference of $25,000 to proceed with the purchase.

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7700 France Ave S #230
Edina, MN 55435
(952) 915-2252 (direct office)
(952) 884-8404 (office front desk)

Steven Hong, REALTOR
Team lead
Old Home Certified
(612) 990-9009

Each office independently owned and operated.  All information is deemed reliable but not guaranteed, and should be independently reviewed and verified. Equal opportunity housing. 

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