I think all of are facting this problem. Buyers get all excited about a property, make an offer and lose it. Then they make another offer and with multiple offers, lose that one too. Then, they finally get into contract, only to have their agent tell them that (1) it might take 3-6 months for the deal to go through, (2) in a declining market, the property might not appraise the the contact price and (3) you really don't have a deal since iit subject to the lender approval which might take 2 months to get and even then, they might counter us. Are we surprised that most buyers lose interest or worse yet, go out every weekend and keep looking for new houses to make offers on.
if you read my last 2 posts about Short Sales, there is another culprit. That is the Short Sale game player. One of their strategies is to make offers on multiple properties, and tie up more than one. Then, since most SHORT SALES contractS doesn't really start until LENDER APPROVAL, they can pick and choose which one or ones to buy after the all shake out.
Don't know about you but this is a problem. We just had an education class in our office and 5 of our top SHORT SALE listing agents sat in a panel. Most had done 10 or more of them. I was surprised to find out that few of them ever closed the first buyer who originally went into contract. So, it is like do all the work and then, when the buyer walks, start the marketing all over again. SHORT SALES are already twice as much work with less commission, so what can we do. I have a couple of suggestions that might help.
Another problem has to do with the appraisals. Since some SHORT SALES take 4-5 months. the comps that the listing agent and even the buyer's agent ran are no longer relevant. So, when it comes time for the new lender appraisal, it doesn't appraise because there have been multiple closings since then. and, even if there were no closings that conflicted with the buyer's price, in the feeding frenzy that happens with multiple offers, the buyer's frequently pay more than what the property will appraise for. I personally had this happen last month. A property listed for $600K, sold for $625K with multiple offers. It appraised several months after the sale for only $560K. A couple of months earlier, the buyer was willing to pay $600k but when the out of area appraiser came up with $560K (which I strongly disagreed with), he wasn't willing to pay over $560K. The lender didn't agree and wanted $8-10K more. Of course, they asked us to chip in our commission.
So, what are the solutions:
- Find out which of the multiple offer buyers is real by asking them to put either all or part of their initial deposit into escrow upon Seller acceptance. Most contracts now state that they put up the deposit upon Lender approval. This should sniff out those investor buyers or those making multiple offers
- When a buyer is excited and really wants to buyer, they will agree to terms that they would never agree to later. So, when the sales price is driven over list price and there is a chance of the property not appraising for that price, why not counter that Buyer agrees to increase their deposit to make up the difference should the property not appraise for the sale price.
Any other suggestions?