Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I imagine a buyer would want the protection of a contract before spending money on an appraisal, but I have seen many sellers offer a recent appraisal as a justification of the asking price. You could certainly do that if this deal falls through.
How long was your house on the market before you received the offer?
In your OP, you say that they have now asked you to take a full asking price offer. Is there a reason why you don't want to agree to that besides the disappointment of losing the extra $5000? You may not get a full price offer the second time around.
The house sold within 24hrs.
They are now offering the full asking price yes, and we accept it. We aren't declining it. The only stipulations we have added are we won't fulfill all of their additional requests i.e. landscaping etc. And I explained why we decided to do that.
We know we might not get a full price offer again, though I actually really feel we would. We want this deal to go through. But if it didn't we could easily bide our time, maybe rent it out for a year, and then sell at a higher price. Sure prices don't always rise, recent history has shown that! But prices are gradually going back up in our region.
They are now offering the full asking price yes, and we accept it. We aren't declining it. The only stipulations we have added are we won't fulfill all of their additional requests i.e. landscaping etc. And I explained why we decided to do that.
We know we might not get a full price offer again, though I actually really feel we would. We want this deal to go through. But if it didn't we could easily bide our time, maybe rent it out for a year, and then sell at a higher price. Sure prices don't always rise, recent history has shown that! But prices are gradually going back up in our region.
I hope it works out for you.
I am actually in the same area as you (if you are in Chandler) and I have seen some pretty crazy things in this market. My neighbor had 4 offers on her house the first day it was listed about 4 months ago. My other neighbors, with an almost identical home, put their house on the market a week later and have had absolutely no interest at all. You would think one of the buyers from the other house would be interested, but I guess not.
We didn't have a pre-approved letter with the contract no. But my understanding was they had an approved mortgage for the full amount (asking plus $5K). It was only the appraisal that came later which derailed their mortgage. I don't know the ins and outs though.
It's interesting you say it's unusual to take the house off the market pending financing. I did wonder about that, but the agent said it should be taken off straight away. We basically followed advice. With my lack of experience I assumed that really indicated it was a done deal. Had I known it could easily be derailed I definitely would have kept the house on view if possible, because obviously having back up interest would be very wise and even a great bargaining tool.
Ah, your agent definitely should have required a pre-qualification letter be submitted along with the bidders offer. This letter should have been forwarded to you as well for your review of the offer. Also, there is no reason why the house should not be PND SB (pending showing backups). If it is a hot market, why would your agent not try to get a backup offer?
Fact: The offer was made, $5,000 over the asking price. As the appraisal came in at the same as the asking price, it shows the price was a very fair and maximum price.
Fact: It is not unusual for a buyer to offer more than the asking price. Sometimes there are bidding wars. But they may be killed, by the appraiser putting maximum value below the offered price. Sometimes the appraisal will be the amount of the offered price. Appraisers are told by the bank, what the offered price is and the appraiser will make the appraised value not exceed that price but will justify the offered price for mortgage purposes. In this situation, the appraiser said the property was worth $5,000 less than the offered price.
Fact: As most people have the money for the down payment and closing costs, that is all the cash they have. When they make the offer for $5,000 more they are expecting the property appraisal will support their offer, and a mortgage will be issued.
Fact: The highest price you can close at, is the appraised price. After the mortgage fiasco of a few years ago, the laws and regulations were tightened up on appraisals, so they will not inflate an appraisal to cover an over priced offer.
Solution: Offer to sell at the original asking price which is the appraised price.
Don't blame the Realtors, and don't blame the buyer. They had no idea that the appraisal would not let the sale go through as written. It would not have mattered if t here was a pre approved loan at a certain amount or not, the actual appraisal will set the maximum amount the buyer is allowed to pay and get a mortgage.
Good advice. We mustn't panic into any sale, that's for sure. In this case they're offering the asking, so that's fine we accept but without a load of clauses. We sold "as is". I think that's fair enough.
Since they could have mortgaged for the appraised amount and secured the $5K from wherever had they still wanted to indicates they changed their mind and are literally offering less now. It doesn't matter how it's worded, it is what it is.
Doesn't anyone just appraise before making the offer?? That way no one promises to pay more than they actually can or want to. Just an idea.
IMO no buyer is gonna spend money to appraise or inspect before having a contract in hand. I usually have the agent pull the sold comps for similar property, look at how fast things are going pending or closing and that tells how hot the market is. If multiple bidding scenario comes up then it's the buyers choice to bid a high enough amount to get to the front of the line. Then you can start negotiating once appraisal and inspection reports come in. This is the tactic used by most people to tie up the property and keep it off the market. I have seen this over and over. If you go back to the house after it's sold usually there is a difference between the asking price and actual sale price. Sometimes it's less which means the seller dropped price sometimes it's more which means buyer came up with cash on top of the loan amount.
If you feel that you can get more than the current offer stick to your guns. If you feel that the 5k isn't the end all then sell at offer price no other concessions
I'm sure I do have some misunderstandings, and I'm happy to be educated
You ask if I would pay over the appraisal? The buyers most probably did have a rough idea of the value before the offer. We just asked for what the comparable market value was at the time. They deliberately offered over the asking price to secure the deal, not because they thought the house was actually worth the extra. I doubt they were under any illusions as to the true value of the house.
But that aside, you ask who could have warned us? Surely if this is common then it could have been mentioned. If buyers offer more than the asking, then isn't it very likely the appraisal will come in lower and therefore the bank won't lend? So offering extra is probably a worthless gesture (unless they are cash buyers).
How can you say an appraisal has zero to do with what buyers can afford and then say a bank will not lend more than an appraisal? What am I missing here. The buyers can only afford what the bank will lend them. They are totally reliant on that. And the bank is reliant on the appraisal.
It was made clear to me that the bank wouldn't lend over the appraisal and since their offer was over that amount, their "offer" was worthless. I'm not saying the buyers would have seen it coming. For all anyone knows the appraisal could have been any amount, less or more. I'm not trying to blame them, just understand if this is very common or not.
Yes, this is very common. Your agent should have have warned you about this numerous times. The reality for most sellers is that they are selling the home to a bank, not a buyer. Therefore, the bank is taking the risk and putting up the money, and therefore has an interest in making sure that they are not overpaying for the home.
Hence the need for an appraisal. The vast majority of appraisals are reasonable and supportable, although once in a while a mistake is made.
I am both an agent and an appraiser so I see both sides of this issue. I have been burned by low appraisals from time to time, it's just part of the business.
1) You are not obligated to lower your price, you can kill the deal and find another buyer.
2) You can insist that the buyer comes up with the difference or you will kill the deal. Many buyers find money that they say they don't have when push comes to shove.
3) You can accept the appraisal and just close the deal and move on. In the long term of life, a few thousand dollars difference in a house sale is not that big a deal.
4) You can renegotiate the price somewhere in the middle of the contract price and the appraisal, and the buyer can come up with some additional money, but not all of it. This is often what happens. You sell for $400,000. Appraisal is $390,000. Buyer pleads poverty. You say the deal is dead. A day or two goes by. Cooler heads begin talking. You renegotiate to $395,000 and the buyer comes up with some extra money and you get a little less than you planned. Nobody is happy but the deal gets done.
Forget asking the appraiser to change his value, it's not happening. Once we sign on the dotted line of an appraisal, that's that. There are professional reasons for this. We are not supposed to be pressured into a value conclusion, and changing the value basically admits to being pressured or coerced. So don't bother asking the appraiser to reconsider. It's usually futile.
Ah, your agent definitely should have required a pre-qualification letter be submitted along with the bidders offer. This letter should have been forwarded to you as well for your review of the offer.
True, but completely irrelevant to the issue at hand. The problem was not with the buyers' finances, it was with the appraisal. (Or even more directly, the problem was that the OP apparently didn't read the contract he signed that explained the appraisal contingency.)
Unlike what the OP and at least one other poster has inferred, there is no indication or implication that the buyers couldn't afford the extra $5k; they simply may have chosen not to pay it because the appraisal determined that the house wasn't worth $170k. If the OP had actually read and understood the offer before signing it, he could have countered by striking the appraisal contingency. The buyer may have then walked away, but at least the OP wouldn't be in the position he is now of thinking that he got played.
Personally, I don't understand the disappointment at all. He asked for $165k, the appraisal said the house is worth exctly $165k, and the buyer is now going to pay him $165k. What's the problem?
IMO no buyer is gonna spend money to appraise or inspect before having a contract in hand. I usually have the agent pull the sold comps for similar property, look at how fast things are going pending or closing and that tells how hot the market is. If multiple bidding scenario comes up then it's the buyers choice to bid a high enough amount to get to the front of the line. Then you can start negotiating once appraisal and inspection reports come in. This is the tactic used by most people to tie up the property and keep it off the market. I have seen this over and over.
They might get to the "front of the line", but it's often nice to have a clean back-up offer that can be used as a negotiating tool. Often, when the original buyer comes back from due diligence with a laundry list of "honey-do's", it's amazing how reasonable they become when you shrug and say, "OK, never mind, we'll go to our backup offer." Suddenly, those 6 GFI outlets, new kitchen fixtures, new gutter, and new carpeting that is a make-or-break deal becomes absolutely irrelevant. ,
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
,
