How the Trick is Being Fought.

Real Estate Agent with Bill Cherry, Realtor 0124242



One sure and empirical statement that can be made about the real estate business is that there are always those who figure out ways to trick a transaction into their favor.


While not particularly new, here's one of those tricks that has been rediscovered by sellers, and how those sellers are attempting to circumvent the obvious fallout their "trick" is likely to create.


It is the purposeful under pricing of a home in a tight market so that a bidding war among prospective buyers will be created.


The hope is that the house will sell for more than it would have brought had it been priced correctly, and had past contractual listing contract terms been interpreted by the courts that the owner was honor-bound to sell at his listing price; he could only negotiate lower offers.


So what we have are mini-auctions.  Real estate sales, ebay style.


That brings on prospects who are encouraged by their agents to turn in contracts that are outrageously high, depending that their lender will turn down their mortgage loan because of the appraisal, and the owner will be forced to compromise the price to what the house is really worth.


The idea is to use the bogus contract to trump all of the other offers.


One large real estate firm is encouraging its listing agents to require that any contract that is in excess of the listing price will have additional verbage in the earnest money contract, similar to this:


"If the buyer's lender's appraised value is less than the price offered by buyer, the buyer agrees to make up the difference by increasing their cash down payment in an amount equal to or greater than the shortfall."


Bill Cherry

Since 1966

Keller Williams Dallas Premier

                                                                           214 730-5500



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Fred Griffin Tallahassee Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

  It is tactics like these that helped fuel the "Boom" of the mid 2000's, and the subsequent Crash that followed.

May 26, 2015 09:00 PM #1
Cheryl Johnson
Highland Park, CA

Yes ... exactly .... "Price Low - Get Multiple Offers - Sell High" has become a pretty common formula around here.  Buyers and sellers simply seem to expect it to be the way things are done.

I think that in the last 15 - 20 years there has been a fundamental shift in how people view and relate to the homes they buy and own.  This is one facet of that shift.

P.S. I do like the clause you quoted ... I wonder if it has ever been challenged in court?



May 26, 2015 09:45 PM #2
Bill Cherry, Realtor - Dallas, TX
Broker & Wealth Coach

Apparently the Texas real estate attorneys feel sure that it is legal.  I believe that used often enough, it'll circumvent another return of the mess Fred Griffin mentions above.

May 26, 2015 11:16 PM #3
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Bill Cherry, If the appraisal is a contingency, as it should be, this clause would be worthless. I would NEVER agree to pay more than appraisal (unless the appraisal is obviously flawed) and my buyers will be protected by all contingencies.

Bill Roberts

May 27, 2015 12:24 AM #4
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