In this crazy market where overbidding is a primary buyer strategy, accepting the highest offer might not always be smooth sailing despite an enticing sales price.
One of the most common problems is an appraisal that comes in for less than the contract sales price. Let’s say you accept an offer for $800,000 and the buyer is qualified for an 80% loan. That means he is qualified for a loan of $640,000 with $160,000 down. However, if the property only appraises for $750,000 his loan amount will be reduced to $600,000 and he is $40,000 short on his down payment to reach the $800,000 contract price. For some buyers this will kill the deal as they either don’t have an extra $40K in cash and/or they don’t want to pay more than an appraiser says the home is worth.
My Tip: As a seller you can avoid this potential issue by including language in your counteroffer, before there is an appraisal, that requires the buyer to agree to pay a certain reasonable amount over appraised value, perhaps $5 - $20K or more depending on the property, should the appraisal come in low. This is basically a premium that the buyer is agreeing to pay for the privilege of having his/her offer accepted. By doing this you eliminate buyers who can’t afford or don’t want to pay the premium and reduce the possibility of your having to fight with the appraiser, lower the sales price or find a new buyer.
This might seem a bit harsh up front but in a competitive marketplace this can make the difference between winning a property or not. If you’re a buyer and comfortable with this idea, I would encourage you to go ahead and include a premium over-payment clause in your offer for the home of your dreams.
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