To the seller it's a blessing. To the agents it's more commission. To the lender it smells like the "F" word. Why would the lender flag this for review and what can you do about it? Since I am the one who gets the flagged files I can help you out a bit. This is not an automatic denial and in fact not going to be happening as much as it did a few months ago but it will still happen. As I am typing this there is a file in underwriting at my office very similar to this situation.
If the listing price is lower than the sales price and there was only one offer you'll likely have a problem. The first thing I think of in quality control is kickback - cash back at closing on a purchase. If you've read my AR blog for long you'll know exactly where I stand on this one. I'm not talking about the ones where a licensed agent gives part of their earned commission back at the table I'm talking about the ones where thousands or tens of thousands of dollars are given to the buyer directly from the proceeds of the loan. However, this may not be the case.
If your deal gets flagged by the lender for this issue what they must see to be convinced otherwise is the DOCUMENTATION supporting multiple offers also over the listing price. Just having one or two offers around, under or slightly over the listing price is not going to convince me this is a valid offer. Even if the property value is supported in that range it's the listing price to sales price you are going to have to overcome.
Further - if the property has been on the market for some time or even previously listed then put back on the market that also is going to be an issue if the sales price is markedly higher than the listing price. Generally we will not accept a letter of explanation from the agent(s), buyer or seller but we will always consider the actual documentation with copies of the multiple offers.
Otherwise what you can expect will be for the lender to (a) deny the application for the loan or (b) offer to lend the listing price and a reasonable margin (for example's purpose only) of no more than 10% increase above the listing price.
THIS IS NOT CARVED IN STONE but it is something you need to be aware of as an agent, seller and buyer. The one thing that will never work is screaming, no matter how loud or profane it is, at the underwriter.
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