This is pretty normal where the shortage of inventory has lead to multiple offers for sellers and typically â€œover list priceâ€. You probably havenâ€™t heard that much in the last 6 years right? Doesnâ€™t this stir up memories of the housing boom again for you? Well, itâ€™s coming back and more fierce than ever. Weâ€™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 itâ€™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.Â Â This leavesÂ the buyerÂ with a daunting decision of either moving forward with the purchase by bringing in the additional cash required to make up the differenceÂ between theÂ 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.Â
Do not quickly jump to remove your appraisal contingency in the midst of a competitive multiple counter situation.Â Make sure you are aware of the potential offering priceÂ vs. appraisal valueÂ and are capable of moving forward in the event that they do not match up.Â Â If you don't, it can back fire and youâ€™ll be back to house hunting all over again.