Ever had this conversation:
Buyer Agent: Hi Listing Agent John, hope you are having a great day.
Listing Agent John: It's going great, hope you are well. Is this a happy call? Is everything on track with your buyer's loan?
Buyer Agent: Well, the lender just received the appraisal back, and the property missed value by $5,000 (appraised value is lower than agreed upon sales price). I know there were multiple offers, all over list price, and we agreed to pay X price, but the seller needs to lower the price so we can move forward. If the seller doesn't lower the price in-order for the buyer to obtain financing we will have to terminate.
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There are a lot of different directions this conversation could turn, and Listing Agent John could respond, however much depends on the discussions you have 2 or 3 weeks prior. Austin has a unique, hyperactive market, where this is a concern for many transactions. With our anemic inventory, we are watching some buyers get overly aggressive to lock down a home after loosing out on several properties or under pressure to lock down living quarters!
If both agents don't have a conversation upfront, and there is a shortage, the debate later down the road might not end well for either side. Buyers have to jump back in a competitive market and seller starts over again with a new buyer. We are initiating this conversation as listing agents, especially on unique homes or highly competitive situations where offer prices head into uncharted values for a particular neighborhood.
What are buyers doing? Some are opting to throw all finance contingencies out the window (Please make sure buyers understand what it means to not include the TREC Third Party Finance Addendum here in Texas and what's on the line). Others are writing in language to their offer that says they will make up any difference between appraised value and contract sales price. Careful here, keep it to facts and always put a cap on the amount if representing buyers. You never know when some appraiser might miss the mark by some obscene amount!
Have the conversation upfront and avoid issues down the road.
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