When I complete a market analysis for my sellers, it shows a suggested price range for listing their home. This range is based upon a detailed comparison of the homes that have sold in the past 3-6 months and within a one-mile radius.
Lately, I have been suggesting that my clients list their home at the high end of my analysis. Then I watch them stare off into space with a big silly grin and dollar signs rolling through their eyes.
At that point, I gently remind them that if they accept an offer from a buyer who is obtaining a loan, the property must appraise at or above the final purchase price or the lender will not approve the loan.
It is common in our current market that multiple offers are pushing prices above list. Sellers should discuss all offers carefully with their Realtor. The price offered by a buyer with a loan can realistically only go “so high” until there is a risk of the home not appraising at purchase price. If that happens, the transaction can fail.
The solution for sellers?…Before accepting a questionably high offer from a buyer who is obtaining a loan, the seller should negotiate that the buyer will agree to move forward with the purchase regardless of appraisal result. That way, if the appraisal is low, the buyer will have to move forward anyway and pay the difference between a low appraisal and the agreed upon purchase price. In addition, seller should require buyer to immediately provide proof that the buyer has the ability (additional cash beyond their down payment and loan closing costs) to do so. All of this, in writing right up front and upon acceptance of the offer.
On the other hand, if given the choice, a cash offer could be a seller’s dream. In this case there will likely not even be an appraisal to worry about… JACKPOT!
Happy selling 🙂
Kevin G. www.KevinGormanSells.com