Latest / USA House Partners Podcast / How to Read a Cash Offer
Transcript
- Greg Raymer: Quick question. If I handed you two offers on your home right now, one for five hundred and two thousand and one for four hundred ninety-eight thousand, which one would you take? Most people say the five hundred and two thousand offer without even thinking about it. Bigger number, better deal, right? Well, not necessarily. And that one assumption is the single most common mistake I see sellers make. They compare offer price and they stop there. But offer price is not what lands in your banking account at closing. Net proceeds are. And those two numbers can tell you very different stories. Today in about five or ten minutes, I'm going to teach you how to actually read an offer. So the next time you're looking at two numbers side by side, you know which one's really the better deal. Let's start with two terms you need to know. Gross offer price is the headline number, the one written at the top of the contract. Net proceeds is actually what's left over for you after everything else gets subtracted out. And there's more subtracted out than most sellers expect. Here's what typically eats into that gross number. First, we got closing costs, title work, escrow fees, prorated taxes, recording fees, etc. These usually run around 1% of the sale price, sometimes more, depending on the deal. Second, we're gonna Any credits or concessions that come out of an inspection. If a buyer's inspector finds issues, like an aging roof, HVA system on its last leg, many buyers will ask for a credit off the price rather than walking away. That credit comes straight out of your net, even though the gross price on the contract never changes. And third, it's financing type. A conventional loan comes with an appraisal, and if that appraisal comes in low, the deal can get renegotiated. Delayed or fall apart entirely. A cash offer skips that risk altogether. So when you're gathering offers through our network of investors, the number worth asking about isn't just what's the price. It's what's my net and how much risk is attached to getting there. Let's make this real with a an exact example I open with. Offer A comes in at $502,000. Offer B comes in at $498,000. On paper, offer A looks like the clear winner. $4,000 higher. Let's actually walk through both though. Offer A is a conventional loan, 20% down, because it's financed, there's appraisal risk. If the home doesn't appraise at $502, the deal can be renegotiated or delayed. The buyer's inspector also comes back with a list of items, and rather than lose the deal, the seller agrees to a $6,000 credit. Estimated closing costs come in around $5,020. Run the math. And offer A nets $490,980. Closing takes 45 days. Offer B is cash. No financing contingency. No appraisal to worry about. The buyer purchases as is and waives the inspection entirely. No repair credit. Estimated closing costs come in around $4,980. Run that math and offer B nets $493,020. Closing takes 14 days. So, even though offer B has the lower price on paper, it puts about $2,000 more dollars in the seller's pocket and it gets there in two weeks instead of a month, or actually a month and a half, with none of the financing risk hanging over the transaction. This is exactly why every time you get an offer, whether it comes through our network of investors or anywhere else. The first question should be never what's the price, it should be what's my net and what has to go right to get there. If you've got offers in hand right now, just starting to think about selling, don't stop at the top line number. Ask for the net. Ask what contingencies are attached. Ask how the financing type affects a risk of the deal falling apart. A good offer should hold up to every one of these questions. If you'd like help actually running these numbers on your own home, Reach out through the link in the show notes. No pressure, no obligation, just a clear picture of what a real net number would look like for you. Next time, we're going one level deeper into contingencies themselves, what they are, and which ones are normal, which ones raise a flag, and how to tell the difference between a buyer protecting themselves and a buyer trying to renegotiate your price after the fact. You won't want to miss it. As we close out and go into our week, I'd like to remember the words of Proverbs chapter three, verses thirty-three and thirty-four. The Lord blesses the home of the righteous with the wise inheriting honor and the humble receiving favor. Till then, I'm Broker Greg, and this has been the USA House Partners Podcast. We'll see you next time.