Terms vs. Price: Which Is More Important in an Offer?

Just this week, our team has put three homes under contract and, believe it or not, the offers we submitted weren’t the highest the sellers received. This just goes to show that price isn’t everything. Terms also play a major role in an offer’s success. 

In this market, it isn’t about price, but the risk to the seller. Sellers want to feel secure in knowing an offer will hold up and the transaction will be able to proceed smoothly. 

One of the offers we submitted on behalf of a client recently won out as a result of its terms. There were six offers on the table, including one $20,000 higher than ours. But the seller was willing to overlook the difference in price because our offer lacked an inspection contingency. Given that the home wasn’t in the best shape, this presented a major benefit to them. 

The seller in this situation understood that the money they might earn from a higher-priced offer was still not a match for the value we were offering through our offer’s terms. 

Appraisal buffers are another example of how terms can sometimes dominate over price. Our team recently worked with a buyer who had a little bit of extra cash. Rather than putting all of this money down, we added an appraisal buffer to the offer. An appraisal buffer is essentially the assurance that if the appraisal comes in low, the buyer will offer a set amount of cash to supplement the difference. This helps to give sellers peace of mind. 

And if the appraisal doesn’t come in low, the buffer offer won’t come into play. In our situation, this was exactly the case. The appraisal buffer didn’t cost our buyer a thing, and they were able to secure a deal for $10,000 less than the top offer on the table. 

Financing is another important aspect of any offer. If waiving financing altogether is feasible, this can be an attractive option. However, this wasn’t necessary in our case, nor is it necessary in all cases in general. 

In the example of a recent transaction we carried out, we had our buyer fully underwritten so that the lender could verify all the buyer’s financial credibility. Being able to show the seller that you are pre-approved will greatly boost your chances as a buyer. 

For most sellers, having a smooth transaction is more important than earning the highest price. Price makes up just one line of an offer, while the terms make up the remaining 20 or so pages. If you have an understanding of how to make your offer’s terms more attractive to the seller, you won’t need to pay the top price to strike a deal. 

If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.