Dear Heather,

I am selling my house and I have two offers, the higher one is subject to financing, the lower one is a cash offer. Which one should I accept?

Dear Seller,

Good for you, what a great position to be in. In real estate, the highest offer is not always the best offer. The cleanest offer is the best offer, as it takes most of the risk out of the transaction. When I say clean, I mean not subject to things such as obtaining financing from the bank, a structural survey, an appraisal, and so on.

Sellers will often accept a lower, all-cash offer over a higher priced offer with conventional financing. This is because they know the cash offer is nearly guaranteed to close. It involves fewer stumbling blocks. Sometimes a bird in the hand is worth two in the bush, so to speak.

A buyer that does not need an additional two or three weeks to secure financing can often complete a sale more quickly.

Once any contingencies such as a boundary survey (vendor’s responsibility) have been satisfied, closing can take place within 30 days.

A faster closing puts money into the seller’s pocket sooner, and there are fewer things that can go wrong.

One of the biggest stumbling blocks with financing can be the appraisal. Appraisals are not cast in stone.

The most common method is reliance on comparable sales, known as the comparative method, which involves choosing several properties and comparing those values to the property in question, adjusting upward or downward for upgrades, location, amenities and features. If a home does not appraise for the purchase price and the buyer is obtaining a loan that requires a 20 per cent down payment, the lender will not lend more than the appraised value unless the buyer coughs up more cash or the seller discounts the price.

There are other options for dealing with a low appraisal, but they can also spell contract cancellation.

Even though a buyer may be fully qualified to buy a home at inception, many things can come up during the loan process.

Apart from the home itself not qualifying, many other conditions for loan approval can become a factor in the buyers’ ability to get financing.

Most commonly, lenders deny loans because the buyers’ qualifications change upon further scrutiny.

Maybe the buyer was not fully employed in the same occupation for the past two years, perhaps financial situations were altered prior to closing, such as the buyer purchasing a new car, loss of job, sickness, unpaid debt, divorce, and so on. Truthfully, anything can happen and buyers with cash are often more reliable.

However, one word of caution, make sure cash really is cash. Buyers have a tendency to throw around the term loosely, just because they have been offered financing or have been preapproved.

Also, be sure to work with an agent you know and trust, who can provide the buyer with an estimate of closing costs and extra expenses over and above the purchase price of your home, so that they are not caught by surprise at closing.

• Heather Chilvers is among Coldwell banker Bermuda Realty’s Leading Sales Representatives. She has been working in Real Estate for 25 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332 1793. All questions will be treated in confidence.