I wrote two offers for two different buyers on condos that I know won't appraise. The first offer was for an Orland Park condo that was priced close to what the buyer paid for it in 2009. The most recent comparable sold for $40,000 less.
Why is it listed so high?
The young owners updated the kitchen and baths beautifully. This was definitely the nicest unit we had seen in 3 days of searching (this buyer is ready to go). I know kitchens and baths can cost a lot, but I'm not really sure we're talking $40,000 in this situation. And try to get an appraiser to agree.
We're waiting for a counter-offer but I don't see this going through at all after speaking to the listing agent. They already turned down a higher offer and that price might not appraise. I guess these sellers figured they would get their investment back 100% (and then some) once they decided to sell. The updates were done 4 years ago, so although they're beautiful and still in style, they're not brand new.
They are going to build a house, but the listing agent said that if they can't get what they want/need, they'll remain in the condo (it is not rentable). I think they needed a better explanation of value and appraisals. I cannot see a cash buyer in this price range for a 3rd floor penthouse unit without an elevator.
I've had to explain to my buyer that even if we were able to agree on a price, it will most likely not appraise and they will not come down to appraised value and I know she won't come up to it. In the meantime, she'll pay for a home inspection and the transaction will most likely not go through. It won't be easy matching this unit, even though it won't appraise.
My 2nd buyers
I have a young first-time buyer couple. We've been out a few times looking and they found a beautiful Oak Lawn condo for sale. They love it! Unfortunately, they weren't ready to write when we first saw it and we went through a second time with two sets of parents. As soon as I call the listing agent to tell him there's an offer in his e-mail, he told me that they had just received another offer 10 minutes prior. However, his seller loved my buyers and me and it was going to be a tough decision for her. She liked us so much she wouldn't answer the first offer until she heard something back from me!
The other offer is a lower cash offer but she really likes my buyers, and they are financing. Both she and the listing agent (who I've dealt with many times over the years, know her unit will probably not appraise. There are no recent comparables that justify her price because they were all distressed sales.
The fact in this case is that this is an elevator building with an indoor pool and the prices are low enough that there would is a good chance of getting some cash buyers, which did happen. The seller just retired and is moving out-of-state. Her decision is to lose money to a young couple she really likes or take the cash offer, which will probably be higher than appraised value, and just move on with her life.
Should we list properties that won't appraise?
Since I've been selling real estate, there has been the question about the value of taking overpriced listings. In both of these cases each condo was beautifully remodeled and decorated - the cream of the crop. But how much value does an appraiser give to these updates? Usually not what the seller expects.
Both of these overpriced units attracted buyers and offers. The Oak Lawn condo will be sold. The Orland Park sellers will probably be spending a long time in their condo and will probably have to put their new construction dreams on hold.
Personally, I might have listed the lower priced condo where I figure there could be cash offers coming in. I think I would have passed on the other condo.