If a Buyer will be financing a property, there will be an appraisal ordered. (a few exceptions may be considered) Buyers in Denver always ask about this process, as being in a strong Seller's market, some Buyers are making offers over List Price. Some of these prices are over Fair Market value, and concerns arise about whether or not the property will appraise.
That is always a great conversation to have so Buyers know what their options are if a property does not appraise. If the home appraises at fair market value, and the contract purchase price is $25,000 above, you should address this gap in the contract. In the current market, the buyer will pay for the amount offered over appraised value. (This is in addition to the down payment and closing costs.)
If the contract is for a VA loan, and the appraiser has taken a general look and knows the home won't appraise, they will call a "tidewater". This gives both agents to provide more information to bring up the price. If there is a gap between the appraisal amount and contract purchase price, this amount needs to be addressed in the contract.
Buyers have asked if they will be "underwater", but the homes are increasing from 15-25% right now, so it will take a few months to make up this price. If they plan to move before a few months, they probably should not overpay.
Comments(38)