The Offer Truth Playbook (Terms > Price)

The Highest Number Isn't Always the Best Deal

You've listed your Cypress or Orange County home. Offers start coming in. One buyer offers $50,000 more than the others. Exciting, right?

Maybe. Or maybe that high offer is built on shaky financing, riddled with contingencies that give them multiple exit ramps, and comes from a buyer who's going to nickel-and-dime you on every inspection item.

Meanwhile, the second-highest offer has rock-solid financing, minimal contingencies, matches your preferred timeline, and comes from a buyer who pre-committed to being reasonable on repairs.

Which offer should you accept?

Here's what we've learned after helping hundreds of sellers navigate offer decisions in Orange County: The offer that closes smoothly at a fair price beats the highest offer that falls apart after 30 days in escrow—every single time.

This guide teaches you how to evaluate offers beyond just the price. You'll learn to identify strong buyers, spot red flags, understand what terms actually matter, and choose the offer that gives you the most certainty with the least stress.

This is for you if:

• You're preparing to list and want to know how to evaluate offers intelligently
• You've received multiple offers and need to decide which to accept
• You want to understand what separates a strong offer from a weak one
• You're trying to avoid the nightmare of a deal falling apart mid-escrow
• You're ready to make strategic decisions instead of emotional ones

START HERE (30 SECONDS)

Find your situation below and jump to the section that matters most:

• "I have multiple offers and don't know how to choose" → Jump to "The Multiple Offer Evaluation Framework"
• "I want to understand what makes an offer strong or weak" → Go to "Decoding Offer Strength: The Key Components"
• "I'm confused about contingencies and what they mean" → Read "Understanding Contingencies: Your Protection vs. Your Risk"
• "I need to know if a buyer's financing is solid" → Start with "Evaluating Financing Strength"
• "I want the complete offer evaluation system" → Read straight through

What Most Sellers Get Wrong About Offers

Here's the pattern we see repeatedly:

A seller receives offers. They scan for the price. They see one that's $30,000-$50,000 higher than the others. They get excited and accept it without reading the fine print.

Then reality unfolds:

Week 1: Buyer's lender requests additional documentation. Delays start.

Week 2: Appraisal comes in $20,000 below offer price. Buyer has no appraisal gap coverage. Renegotiation begins.

Week 3: Inspection reveals minor issues. Buyer requests $15,000 in repairs or credits. Negotiations drag on.

Week 4: Buyer's lender raises concerns about debt-to-income ratio. Financing contingency still in place.

Week 5: Deal falls apart. You're back on market as a "failed sale." Stigma attached. Other buyers have moved on.

You wasted 5 weeks and now you're starting over—likely accepting less than you could have gotten from the second offer.

The mistake: Choosing price over terms, and paying for it with time, stress, and ultimately money.

Decoding Offer Strength: The Key Components

Every offer has multiple dimensions. Here's what actually matters:

Component #1: Purchase Price

What it is: The dollar amount the buyer is offering to pay

Why it matters: Obviously affects your proceeds

But remember:

• Highest price means nothing if the deal doesn't close
• Price is negotiable if appraisal comes in low
• Other terms can be worth $10,000-$30,000 in real value

How to evaluate:

• Compare to your list price and recent comparable sales
• Consider in context with other offer terms
• Recognize that price alone doesn't determine your net proceeds

Component #2: Financing Type and Strength

This is the #1 predictor of whether a deal will close.

Financing types ranked by strength:

1. All Cash (Strongest)

• No lender, no appraisal requirement, no loan contingency
• Can close in 7-14 days typically
• Highest certainty of closing
• Buyer must provide proof of funds

2. Conventional Loan with 20%+ Down (Very Strong)

• No PMI, easier underwriting
• Strong buyer financial position
• Appraisal required but buyer has capacity to cover gap
• Standard 30-45 day timeline

3. Conventional Loan with 10-19% Down (Moderate)

• PMI required but otherwise standard
• Buyer may have limited cash for appraisal gap
• Normal underwriting process
• Watch debt-to-income ratio

4. FHA/VA Loans (Requires More Scrutiny)

• Government-backed, more stringent property requirements
• Appraisal includes condition/safety items, not just value
• May require repairs you wouldn't otherwise do
• Longer timeline (45-60 days typical)
• Down payment as low as 0-3.5%

5. Non-QM or Alternative Financing (Highest Risk)

• Non-traditional lenders
• Higher interest rates
• More complicated underwriting
• Higher likelihood of issues

Red flags in ANY financing:

• Unknown or online-only lender
• Pre-qualification letter (not pre-approval)
• Minimal down payment relative to loan amount
• Buyer at absolute maximum debt-to-income ratio
• Generic pre-approval not specific to this property/price

Component #3: Down Payment Percentage

Why it matters:

• Shows buyer's financial strength
• Indicates skin in the game
• Affects appraisal gap risk
• Signals likelihood of loan approval

Down payment tiers:

20%+ down:

• Strong financial position
• Can likely cover appraisal gap
• Lower loan-to-value = easier approval
• Motivated to close (significant earnest deposit typically)

10-19% down:

• Moderate financial position
• Limited ability to cover large appraisal gap
• Still viable but less cushion

5-9% down:

• Thin margins
• Minimal ability to adjust if appraisal is low
• Watch for other red flags

Under 5% down (FHA 3.5% or conventional 3-5%):

• Buyer has minimal reserves
• Very limited ability to handle surprises
• Appraisal gap coverage unlikely
• Higher risk of financing falling through

The insight: Higher down payment = more financial stability = higher probability of closing.

Component #4: Earnest Money Deposit

What it is: The "good faith" deposit showing buyer is serious

Standard: 1-2% of purchase price

Strong: 2-3% of purchase price

Why it matters:

• Shows financial capability
• Creates incentive to close (buyer wants it back)
• Larger deposit = more serious buyer

Red flags:

• Deposit under 1%
• Delayed deposit (beyond 3 days)
• Requests to reduce deposit during negotiations

Component #5: Contingencies

These are the buyer's legal exit ramps. We'll cover these in detail below.

The general principle:

• More contingencies = more risk for you
• Longer contingency periods = more uncertainty
• Stronger buyers can shorten or limit contingencies

Component #6: Timeline

Closing date:

• Does it match your needs?
• Is buyer flexible if your timeline changes?
• Can buyer actually perform that quickly (if fast close)?

Contingency removal timeline:

• Standard: 17-21 days
• Strong: 7-10 days
• Red flag: 30+ days

Rent-back:

• Buyer offers you time to stay after closing
• Can be worth $3,000-$8,000 in value to you
• Free rent-back is a significant concession

Component #7: Repair Approach

How buyer signals their repair expectations:

Strongest (for you):

• "Buyer will only request repairs for major system failures or health/safety issues exceeding $X threshold"
• "Property accepted in current condition with normal wear and tear expected"
• Pre-commits to limiting repair requests

Moderate:

• Standard inspection contingency with no pre-commitment
• Will request repairs based on inspection findings
• Typical negotiation expected

Weakest (for you):

• Open-ended repair requests
• Buyer hasn't toured property thoroughly (may be shocked by condition)
• History of extensive repair demands (if you can discover this)

Component #8: Appraisal Gap Coverage

What it is: Buyer's commitment to cover the difference if appraisal comes in below offer price

Strong offers include:

• "Buyer will cover appraisal gap up to $20,000-$30,000"
• Shows financial capacity and commitment
• Reduces your risk of renegotiation

Moderate:

• "Buyer will cover appraisal gap up to $10,000-$15,000"
• Some protection but limited

Weak:

• No appraisal gap coverage mentioned
• Buyer can renegotiate or walk if appraisal is low
• Common with buyers who put minimal down payment

The reality: Appraisal gap coverage is worth more than its dollar amount—it's insurance against renegotiation.

Understanding Contingencies: Your Protection vs. Your Risk

Contingencies are conditions that must be met for the sale to proceed. They give buyers legal exit ramps.

The Main Contingencies in California

1. Loan/Financing Contingency

What it means: Buyer can cancel if they can't get financing approved

Standard timeline: 21 days

Your risk:

• Buyer's lender may deny loan after weeks in escrow
• Buyer can use this to renegotiate if appraisal is low
• Deal can fall apart late in process

How to evaluate:

• Shorter period (17 days) is better for you
• Strong pre-approval reduces risk
• Cash offers eliminate this entirely

Red flag: Financing contingency longer than 21 days suggests buyer isn't confident in approval

2. Appraisal Contingency

What it means: Buyer can cancel if appraisal comes in below offer price

Standard timeline: 17 days (tied to loan contingency)

Your risk:

• If appraisal is low, buyer can demand price reduction
• Or buyer can walk away and get deposit back
• You've wasted 2-3 weeks and may need to reduce price

How to mitigate:

• Appraisal gap coverage (buyer agrees to cover X amount if appraisal is low)
• Strong comparable sales support your price
• Cash buyers sometimes waive appraisal contingency entirely

Red flag: Buyer with minimal down payment and no appraisal gap coverage is high risk for renegotiation

3. Inspection Contingency

What it means: Buyer can inspect property and request repairs, credits, or cancel

Standard timeline: 17 days

Your risk:

• Buyer can request extensive repairs
• Or use inspection to renegotiate price
• Or cancel if they get cold feet (inspection is common excuse)

How to evaluate:

• Shorter period (7-10 days) shows commitment
• Pre-commitment to limit repair requests is valuable
• Buyer who's thoroughly toured property is less likely to be surprised

Your protection:

• You don't have to agree to repair requests
• But buyer can cancel if you don't

Strategic consideration: Inspection contingency protects buyers from surprises, which ultimately protects you from lawsuits. Don't celebrate buyers waiving this unless they're experienced investors.

4. Sale of Buyer's Property Contingency

What it means: Buyer can't close until they sell their current home

Your risk:

• You're at mercy of buyer's home selling
• Could take weeks or months
• Buyer's sale could fall through
• You're essentially off market while waiting

How to evaluate:

• Is buyer's home already in escrow? (Better)
• Is it just listed? (Risky)
• Not listed yet? (Very risky—you're basically taking your home off market with no certainty)

Red flag: This contingency without buyer's home already sold or in escrow is extremely risky

Counter-strategy: Negotiate a "kick-out clause" (you can accept backup offers and give this buyer 72 hours to remove contingency or walk)

5. Review of HOA Documents (If Applicable)

What it means: Buyer can review HOA rules, budgets, meeting minutes, etc. and cancel if unsatisfied

Standard timeline: 3-7 days

Your risk:

• Buyer may find something objectionable in HOA rules
• HOA financial problems could surface
• Special assessments could be revealed

How to evaluate:

• Very standard contingency, not usually a red flag
• Shorter period is better

Contingency Removal: The Critical Deadline

When buyer "removes contingencies," they're giving up their right to cancel without penalty.

Before contingency removal:

• Buyer can cancel for any reason related to contingencies
• Gets earnest deposit back
• No penalty

After contingency removal:

• Buyer is committed to closing
• Can only cancel for reasons outside contingencies
• Risks losing earnest deposit if they back out

Why this matters to you:

• Strong buyers remove contingencies quickly (7-14 days)
• Weak buyers drag out contingencies (21+ days)
• Once removed, you have much more certainty

The strategic insight: An offer with slightly lower price but faster contingency removal may be better than higher price with extended contingencies.