Sellers Know Thy Loopholes!
I just received a $600,000 offer on a home I listed recently for $565,000.
Home run, right?!
Well…. not exactly. The neighborhood comparable sales data will not support a $600,000 sales price when the property is appraised by the lender. The Buyers are very aware of this fact. Their plan was to renegotiate the contract sales price after the appraisal value comes in low.
If the contract is subject to Third Party Financing and the property does not appraise, the Buyer has a “get out of jail free” card. They can terminate the contract and receive their earnest money back days, or even hours, before closing.
Sellers – if you are on the moving truck, this is a problem!
One possible solution is to remove the Third Party Financing Addendum and have the Buyers waive their right to terminate regarding the appraisal within 12-15 days of the effective date of the contract. As a Seller, you don’t want to allow the Buyer an unlimited amount of time to complete the appraisal.
Buyers have multiple contingencies in real estate contracts that allow them to terminate and receive their earnest money back. Make sure you understand the contract that you are signing – whether you are the Buyer or the Seller. Your agent should be able to clearly guide you through all of the paperwork.
Buyers – do NOT raise the red flags!
The Sellers of the above $565,000 property decided not to accept the $600,000 offer. They had concerns about the buyer’s strategy and did not want to deter other potential offers. The Sellers elected to sign off on a little lower offer that included a lender pre-approval letter but was NOT subject to the Third Party Financing Addendum. They also stipulated the Buyers waive their right to terminate based on the lender’s appraised value.
Buyers – make sure your agent has the ability to help you prepare a compelling offer that does not raise red flags to the Seller!
If you would like to buy or sell a home in today’s fast moving real estate environment, please call my direct line at 972-841-3110. I’m looking forward to talking to you personally.