My home buyer customer "lost" in a multiple offer situation this week. It was a disappointment. The question that always arises when an offer is rejected in favor of another is "Why did the seller take the other offer?"
Many times the why is not really known. I am not sure what the other offer price was but I am confident it was close to my buyer's offer. Still, the other offer looked more appealing because of two issues. First, the other had a "size-able down payment."
But I believe the main reason was a little thing called an "appraisal contingency."
Buyers want to feel confident that the appraised value of the property they are buying is at least equal to the contracted purchase price. Even most of the cash buyers I have worked with have opted for an appraisal even though no mortgage was involved.
It makes sense, right?
If a mortgage is involved then the appraisal will be of utmost importance. The lender is not going to loan more than a property is worth. If the buyer is putting down 10% of the appraised value but the appraisal is low then it could mean more money out of the buyer's pocket.
The appraisal contingency protects the buyer.
If the appraised price is less than the purchase price the buyer has two options (a) terminating the contract with a refund of the deposit to the buyer; or (b) waiving and removing the contingency and continuing with the contract.* Another option if the appraisal is low is for a buyer to request the seller lower the contract price to the appraisal price.
It is easy to see why most sellers will favor an offer that has no appraisal contingency and only an inspection contingency. If the inspection goes well then the chances of closing go up tremendously.
I believe buyers should have as much protection allowed when buying a home including inspection, financing and appraisal contingencies.
Considering buying a home in Melbourne, Florida? Give me a call at 321-693-3850 if I assist in any way.
Selling your Viera, Florida home? Call me for a free market analysis.
I am a Florida licensed real estate broker. The above is not to be considered legal advice.
*The above options extracted from the Florida Realtors® and The
Florida Bar Comprehensive Rider to the Residential Contract fro Sale and
Purchase, 9F. APPRAISAL CONTINGENCY
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