Many people like to party like it 1999. However, some Buyers are also trying to Offer like it 1999.
Back in 99', a buyer with no down payment could Offer above asking and request up to 6% in concessions. The concessions would go towards closing costs and down payments. This mark-up strategy was based on easy mortgage money and almost unrestrained appraisals.
2011 is a MUCH different market. However, I am still receiving offers that are straight out of 1999. Last week one of my listings received multiple offers, and I advised my Seller to reject an offer that was $15,000 above asking but had $11,000 in concessions. In the end we accepted an offer that netted my Seller $1800 less than the higher concession offer.
After rejecting the 6% concession offer, I received calls from the Loan Officer and Buyers Agent questioning our decision and pleading for their Buyer. They wanted to know why we would take a lower offer over their offer. Here is the list of rationale that I communicated to them:
- 6% in concessions communicates that this could be a weak buyer with no cash.
- There is concern that underwriting may reject a 6% concession offer.
- There is a great concern that the house may not appraise for the higher marked up offer amount.