Top-Dollar Offer? How to Avoid a Tug-of-War with Your Buyer

Real Estate Broker/Owner with Steele Group Realty DRE# 01474222

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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Comments (4)

Anna "Banana" Kruchten
HomeSmart Real Estate - Phoenix, AZ

Hi Marti we've been using this strategy for years when it's needed to win a bid.  I'm glad that we finally have an addendum that put the terms and conditions of the appraisal waiver into clear understandable language for buyers and sellers. Our buyers have won bids useing this addendum.

Feb 10, 2022 03:46 PM
Marti Steele Kilby, CRS
Steele Group Realty - La Mesa, CA
Broker/Owner, San Diego, CA

Thanks Anna. It is a crazy market, and no one likes to over-pay but I try to explain it as a premium they are agreeing to in order to get the home they really want. I also remind them that by the end of the year, should the market maintain,  it is likely that premium will disappear into increased equity.

Feb 10, 2022 05:08 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

Feb 13, 2022 03:42 AM
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Marti - properly prepared buyers in any market can help them achieve success.  Having local and current knowledge (awareness too) of what is happening in the neighborhoods they are considering a move is important.  Tug of wars may still occur but hopefully battle scarring may be minimized.   

Feb 13, 2022 04:25 AM