Here's something I'm seeing more and more: after getting outbid a few times, some buyers are writing offers much higher than list price just to get their offer accepted, and then hoping and praying that the appraisal doesn't come in that high. And that's a huge gamble.
The first and very obvious reason is -- what if the appraisal does come in high? If the buyer can't step up to the plate, they may have lost 4+ months of search time, and the other buyers who put in more honest offers, got hurt.
Second, a smart listing agent can spot this strategy. Depending on their client (bank or private seller) they will then have to factor in the level of either realism or greed that the seller is operating under, and advise them accordingly.
A full blown appraisal will net everyone a realistic number, although appraisers these days tend to operate on the more conservative side.
If a bank is involved, they can act cheap and order a BPO, paying some hardworking agent $40 to do a mini-appraisal. Lately, I've sensed a lot of these agents are slapping them together hurriedly, and are much more liberal in their final number (they must be subconsciously hoping for a quick market upturn) thus causing the bank to insist on the higher "price".
Even if the buyer can step up at this point, when the real appraisal comes in, we can all be back at the starting gate. As for the buyer who offered way over realistic market price, and the listing agent who accepted it, the bank and/or seller CAN accept the lower price, but does not have to. In some cases, buyers have waited for months for a short sale, and it can all fall to pieces at this point. All the other buyers who originally put in offers are also the losers here as well.
Since price and time are related equations, and it IS hard to guess what market value will really be 4 or 6 months in the future, all we can do now is to act with full integrity.
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