Saturday, April 6, 2019 / by Sara Koenig
This is typically the third big point of negotiation in a Real estate transaction following the offer and then the home inspection. A low appraisal could be a potentially serious bump in the road when you are near the finish line. There are ways that your broker can protect you against this as a seller in our market and if your home is likely going to receive multiple offers you should talk this through as you get ready to review each offer.
In our current Spokane market if you are listing your home below the $250,000 price point the likely event you will receive multiple offers is pretty high. There are a lot of buyer's that are searching within these price points and there is the lowest amount of inventory available in these price points as well, making for an extremely competitive situation for buyer.
While this is extremely exciting to think about as a seller, you should be aware of your options should you accept an offer so high over asking price that it may not appraise for your buyer's lending contingency. If appraisal comes in low, there is a whole new round of negotiations that come into play:
- Buyer can put additional money down toward their loan.
- Seller can agree to reduce price to meet the appraised value.
- Buyer and Seller can agree to meet somewhere in the middle.
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There are also steps you can take upon the offer review period with your broker to minimize the risk of any potential offer.
Some items I would suggest to review would include:
- How much money the buyer is putting down on the purchase?
- Did the buyer include a 22AD or Additional down addendum up front?
- Is the buyer asking for you to cover part or all of their closing costs?
All of these indicators can let you know as a seller how financially strong the potential buyer is, and if there came an issue with appraisal how likely they are to be able to put more money toward the purchase or if they may end up with lending issues down the road.
Minimizing risk as a seller when you are looking at picking an offer should be one of the approaches your broker walks you through. Every offer comes along with a strategy if they have a great buyer's agent. Did they go after a fast close? Did they go after strong lending from a down payment perspective? Did they eliminate some contingencies?
Take the time to talk through each offer and maybe even have your broker look at comps one more time to see what the "Sold" prices are and how they would support the offering price when an appraiser comes through to do their analysis. This can help you decide and re-asses how you feel about price and the potential risk for a low appraisal depending on how high offers have gone.
I have seen offers escalate above $20,000-$30,000 OVER asking price in our current market here in Spokane. So, the potential based on list price IS there. Now, if you are listing a luxury home here in Spokane, this probably isn't going to be a realistic scenario for you. In your case, it's extremely important you have a broker list it correct right out of the gate! Eliminating appraisal issues and still remaining competitive based on what the market has shown. Which means what has ACTUALLY SOLD.
I hope this advice comes in handy for you if you are getting ready to sell your home, or are thinking about selling.
Sara Koenig | Spokane Realtor