If a buyer is paying cash it is one thing, no appraisal. It they are financing, you are correct the appriasal may come in lower then the accepted offer. At that point the buyer and the seller can continue their negotiating and maybe meet in the middle but that still means the Buyer will have to bring money too the table or they can walk away. But I would think it they really like the house they will find the extra money.
Good luck to your friends :)
Karen Paytas, GRI, CMS
Real Living Kee Realty
The LISTING price, whether it is a HUD home or not, is a number to get things started:
It may be a HIGH number, to convey the Seller's WORTH of the home. Or, it may be a very low price, to foment multiple offers. It is never set in stone.
Many Buyers have not been in this MARKET before; and do not understand that this one of the "normal" markets we see over the long term.
It is not an aberration; this is the usual way to bid and buy a house. If you cannot handle it, if you want things to unfold before you like a red carpet; you should have been looking a year ago.
As all the experts before me have revealed, the reality of todays market requires a buyer to wake up and smell the coffee. What many buyers don't realize is there currently exist 4 purchasing levels for homes. If a buyer is dependant on Trulia or Zillow, or for that matter even wasting time on these entertianment sites, they are yet to detect the aroma of the roasted Arabica been.
In the past week, two homes were systemicly sold, one in (-1) days on market, the other sold the very first day. For the home seller it was EZ. Every inquirer was advised to know what 'Fair Market Value' was. An educated buyer is the very best buyer.These buyers do their research (with the professional they hired) to get the facts and won't be caught on real estate aggregate websites. Their time is too valuable. In the mentioned cases, the buyer understood the issue was "HOW FAR ABOVE LIST" they were willing to go. With the assist of a little caffine, the buyer(s) easily recongnized the VALUE and reponded accordingly. Those who needed to think about it had their decision made for them.
A buyer would be well advised to understand, when a home is ready for sale. the first folks notiifed is those within the listing agents data base.
The second group will be those agents in the listing agents office.
The third will be all the agents who have done business (successfully and without drama) with that agent.
The fourth will be the activie agents in the area.
Fifth the home is placed on the MLS
Then eventually, the data is changed and appears on real estate aggregate websites.
If you want to succeed in purchasing a home, you need to get the 'real' information, respond according to what 'market value' dictates, and if you find yourself asking 'WHY?" you need to understand the plan you have in play needs to be modified. The suggestion that 'Fair Market Value" as determined by willing seller and willing and able buyer (not the bank) equates to overpaying may suggest a bit of a disconnect with the current market.
That is the role your multi-dimensional real estate professional fulfills.
Very often, a commitment to the agent representing the buyer, can get a serious buyer in the loop for level one to four. These resources will not be spent on tire kickers and those 'looking for a deal' or under the delusion HUD homes in 'move-in' condition are at such a great value to merit the frustration.
There are many ways to make sure your offer prevails. However, these suggestions are of great value and should not be deminished by offering them freely here.
It is however, easy to recognize, that real estate professionals have many resources they can bring to bear in acquiring a 'move in Ready' home. For a buyer to maintain a pedantic fixation of bank owned property suggests an unwillingness to adapt to what the current real estate market requires.
Consult with your real estate professional. Thats what they are being paid for. The buyer and seller, however, MUST folllow the guidance provided by those they have hired. That is how you get the results you want, not by second guessing those who you hire to guide you.
Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
The first is with bidding on a HUD home it is the net outcome which is the most important.
If there are 2 bids one for $49,000 and one for $50,000 but the $50,000 asked for 3% in closing costs then the $49,000 bid would win.
The second is the price listed is the HUD appraised price.
HUD homes are appraised against similar foreclosed homes that have recently sold in the general area, including other HUD homes. The condition of the home is taken into account with the cost of any needed repairs in mind and with the understanding that they're being sold "as-is." HUD does not want to hold onto inventory, so list prices are set at levels to secure buyers.
Given this criteria when I work with Buyers buying a HUD home we also do comps on all homes in the area. The HUD appraisal is important but when financing appraisal is completed they will use all the relevant comps and not just the foreclosures which can, but may not raise the price. The type of financing can be relevant also FHA vs RD vs Conventional.
The third is the earlier you bid the better. If 2 identical bids come in but one comes in on day 1 and the other at 5pm on the final day of the listing, the first bid wins. It is a true first come, first served. I have had clients in my office at 6am on opening day. Thank goodness I live on a farm!!! Keep in mind not all initial winning bids go through. I advise my clients they can keep their options open by becoming back-up bids.
The fourth is my company has a couple of agents who specialize in HUD's; listing several hundred in the last few years. When I started with HUD offers I sought their advice. They felt that within the first 90 days bids within 5-7% of the list price (including concessions) were the most successful. After 90 days there is more room for movement.
Overbidding the appraised price on a HUD home does not necessarily denote overpaying for the property. My advice make sure their agent is running the comps for them and they are getting their bids on in as soon as possible.