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Caroline Tumidajski - Luxury Homes - Investment Properties' Blog

By CAROLINE TUMIDAJSKI | Agent in Carmel Valley, San D...

Can Writing An Offer Over List Price Backfire On You???


Are you currently in this same predicament where you have been looking for a house and writing offers but not getting anywhere for the last few months? Is your excitement to own a home (or a new home) diminishing, rejection after rejection? Is the number of offers written ramping up to the double digits? If you’ve answered yes to this we may have the answer for you. In our San Diego market, it is very likely that a buyer will have to offer over list price.

This is pretty normal where the shortage of inventory has lead to multiple offers for sellers and typically “over list price”. You probably haven’t heard that much in the last 6 years right? Doesn’t this stir up memories of the housing boom again for you? Well, it’s coming back and more fierce than ever. We’ve seen this becoming the norm with houses in a high demand area.

For instance, recently a property in the desirable community of Carmel Valley came listed for $630,000- $690,000. Our buyer submitted an offer for $700,000 and was rejected. Often times list agents will not disclose the reason for rejection but you can believe that it’s either;
1)The offer they chosen was from an all cash buyer. This allows the seller for a fast closing since there is no loan process to wait for thus no appraisal is involved too.
2) The offer they chosen could have been at a higher price. Unfortunately, we will have to wait until the sale is recorded in order to find out. It closed 6 days later to an all cash buyer for $720,000.

Sure sometimes offers over list price can backfire. If the appraisal value reports back lower than the contract price, that creates a discrepancy on what the bank will lend the buyer. The discrepancy has to be made up by trying to re-negotiating with the seller to have the sale price reduced to match the appraisal. However, if the seller has competitive back-up offers, they will likely reject this proposal.  This leaves the buyer with a daunting decision of either moving forward with the purchase by bringing in the additional cash required to make up the difference between the appraisal and the contract price, or having to cancel the sale and start the housing search all over again. Sometimes there is a chance to have the buyer and seller split the difference, which still requires the buyer to have that extra disposable cash. 

Do not quickly jump to remove your appraisal contingency in the midst of a competitive multiple counter situation.  Make sure you are aware of the potential offering price vs. appraisal value and are capable of moving forward in the event that they do not match up.  If you don't, it can back fire and you’ll be back to house hunting all over again.

Comments

By Dusty Brazil San Diego Realtor,  Fri Apr 5 2013, 07:06
So so true

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