Waiving Appraisals to Win

How to ‘Win’ in multiple offer scenarios?

This is an often discussed topic with my agent friends. All of us have been in the situation with our buyer clients where we are just one potential purchaser in a sea of offers…. the most I have competed with were 17, seriously!

Cash offers are ruining it for many of our ‘regular folks’ looking to purchase with a hefty downpayment and a mortgage.  Often it is impossible to compete with the cash buyers as they can close in a matter of days and they have no appraisals.

When we obtain a mortgage, the mortgage lender requires an appraisal on the property. If the property does not appraise for the purchase price, then the lender will not loan on it with the terms that were promised to the buyer.

Thus, appraisal matters for the seller.

Say my buyer, Simon, offers the moon on a house – a whopping $600,000 when similar properties have sold for tops $575,000 in the recent past.  He is taking out a mortgage. He wants to be as competitive as possible.

Simon has already waived his inspection, reviewed title and has no other contingencies in the offer. He in offering a hefty amount of earnest money.  Only thing looming over his head is a financing contingency and an appraisal. What can he do?

Simon can opt to not include a financing contingency and/or the appraisal portion of it.  If Simon does not include the financing contingency and his offer gets accepted (yay!) then he has no way out of the deal.  If for any reason Simon does not complete the purchase then his earnest money will be easily contestable by the Seller.

What if the home doesn’t appraise?  To stay in contract, Simon will have to bring the difference between the appraised price and the offer price in cash to closing.

The seller would now look at Simon’s offer almost as good as cash.  Simon could potentially beat out a cash offer that was lower and he would likely beat out other offers with mortgages including appraisals.  It’s a risk, but it works, has worked many times for my buyers who have a good risk tolerance.

Here’s the deal, appraisers are very lenient right now, most homes appraise.  And say you are like Simon and putting down $120,000 for your 20% downpayment, you probably have the ability to fork out another $20K if the place does not appraise. The price you are paying for the property has no changes, it’s still $600K.

I have had Buyers leave in the appraisal contingency but allow for a cash amount they are willing to bring to close, with a cap, if the property does not appraise. This is a nice alternative for those less risk tolerant.

I laugh when people say to me “hey, the real estate market is so hot, agents must be killing it!”  Remember every offer we write, we write for free. It isn’t until a purchase closes that we get paid.  This market is killing us! There just are not enough listings to go around for the buyers. Means many agents driving/writing/driving/writing day in and day out with no paycheck.  So heck yes we will be looking for ways for our clients to ‘Win’ – within their risk tolerance of course.

And if you have a home to sell? Call me! (206) 412 4663 – this is the time to get it on the market – you will be the ‘hot stuff’ in town. I promise.