Questions Before Accepting An Offer to Buy in New York

When it comes to selling real estate, it helps to be thorough in your evaluation before accepting an offer from a buyer. The offer price is paramount, especially if an all-cash offer. But even then, there are a few more things you’ll want to consider. For instance, If the building is a co-op, then you’ll need to think about board approval. If the buyer is financing the purchase, then you need to be sure they have a good chance of being approved. These kinds of situations, when they go wrong, can tank a deal in less time than it takes to sign your name.

As much as we’d all love to accept the first fat check that comes our way, sometimes it’s in our best interest to say no and wait for another offer. Here are some crucial questions to help you determine when this is the case.

Questions About Financing

Every seller want’s a smooth and fast transaction. When considering an offer to purchase with the help of a mortgage, you have to be sure they’ll be approved. One good sign of this is an offer that comes pegged with a pre-approval letter from the buyer’s bank or mortgage company. However, don’t consider this a reliable guarantee. A pre-approval letter only tells you the bank has taken a minor look at the buyer’s finances and determined that they will likely be approved, typically within a 90-day window. Don’t confuse this with a pre-qualification letter, which is a far better mark of a buyer’s creditworthiness.

Still, it’s a good start. To get a better picture of how strong their offer is, ask how much money remains after making a down payment? What bank or mortgage company will they be using? What interest rate would they consider acceptable? All these and more play a big part in determining how viable an offer is.

Another concern will be whether or not the buyer wants a mortgage contingency included in the contract? This is a fairly standard request, but you should be wary if they ask for a longer time-limit than the typical 30-45 days. It’s not exactly a red flag, but it should raise some eyebrows and require a little more probing to determine the buyer’s likelihood of being approved. If they fail to get approved, then you’ll have lost precious time by taking your home off the market.

Questions About Board Approval

Even a buyer with guaranteed financing or an all-cash offer still has another step to overcome if the home they’re purchasing is in a co-op building. The building’s board has to sign off on the sale before it can be finalized, and there’s a lot they take into account before deciding. As a seller, you’ll be doing yourself an immense favor by determining early-on how likely a buyer is to pass the board approval process.

Key questions to ask include:

• Their Debt-to-Income Ratio – Your co-op board will have an acceptable range for this, and you’ll want to be sure the buyer falls within it.
• Their Occupation and Job Security – Your buyer’s choice of occupation will play a big part in determining how likely they are to receive board approval. Typically, you want to see a buyer that’s been employed in their current position for at least 1-2 years. If the buyer is self-employed and works from home, then that’s a potential red flag. Most boards will be wary of accepting a buyer that can’t demonstrate job security and consistent bank deposits.
• Their Letters of Recommendation – These letters carry a great deal of weight, with most boards requiring at least five letters per applicant. Usually, the buyer’s broker will be responsible for ensuring these letters are picture-perfect. But your own broker will also want to check that they meet all the criteria and assist the buyer’s broker in tailoring them to the board’s specific needs.

Questions About their Overall Financial Position

This ties in with the previous point, but it also tells you a lot more about the buyer’s current financial position. Have your broker ask the buyer to complete a financial disclosure statement. A REBNY financial statement will give you a more accurate picture of their finances and tell you a lot about the buyer. For instance, you’ll know if whether they currently have a home and need to sell first, or if they are renting.

Determining what the buyer’s aims are with the property will also be an essential step. Most co-op boards don’t look favorably on investment properties. In some cases, they have restrictions on pieds-a-terre or parents buying for their children. If the buyer has a pet, then that might be a concern if the board has no-pet rules.

Questions About their Home Search

A big part of deciding between offers is distinguishing between serious buyers and “real estate tourists.” The latter can be substantial time wasters that have no intention of ever making an offer. They show up at open houses and feign interest because they either have nothing better to do or want to find ideas for their own home.

Asking about a buyer’s home search up until now can give you some important clues about how serious they are in making an offer. For a start, ask how long they’ve been looking? If their answer is a year or more, then chances are they’re either very difficult to work with or still aren’t sure what they’re looking for. Ask about what they’re looking for in an apartment and where else they’re looking? If their answers are specific and consistent, then they’ve likely thought very hard about it and want to make an offer.

What about their timescale? Do they need to close soon, or might they drag out the transaction? Even when an offer is serious, you’ll want to be sure the buyer’s timescale for closing is similar to yours. Figuring all of this out early on can alert you to what to expect if you agree to their offer. For instance, maybe you want to close as soon as possible on the home but also need to remain in the home for a limited time. Will that work for the buyer, or is it likely to be an issue later down the line?

Questions About the Buyer’s Plans

Does the buyer want any repairs or alterations to be made before the sale goes through? If so, are you prepared to meet these conditions? Even if you’ve included an inspection contingency to cover you against this eventuality and the deal falling through, that still doesn’t make up for the time you’ve lost. The point is, you need to find a buyer who’s offer is compatible with your intent to sell. What are your priorities for selling, and do they match up with the buyers? Every deal will have a bit of friction to be worked out. But if there are major disagreements in needs and priorities, then you’re only setting yourself up for trouble.

This last point is where having a talented real estate broker at your side can pay off. They’ll have a thorough understanding of your needs and how to recognize when an offer matches them. Sometimes it’s worth holding out for a better offer when they don’t match.