To include an appraisal contingency or not, that is the question

I've written about it in prior newsletters, and I'm certain you've noticed as well...it's a Seller's market right now!

A Seller's market can bring multiple offers on homes - often leading to the winning bid being well above the listed price along with other terms favorable to the Seller. When a Seller compares multiple offers side-by-side, Sellers strongly prefer contracts without appraisal contingencies. Here's why...

If there's an appraisal contingency and the appraisal comes in low, the Buyer can request the Seller reduce the sales price to the appraised value. The Seller then chooses one of these three options:

The Seller can agree and lower the price to the appraised value (the Seller feels like they are losing money)
The Seller can offer to split the difference somewhere between the values (the Seller still feels like they are losing money)
The Seller can refuse to lower the price

If the Seller doesn't drop the price, the Buyer has to decide if they want to bring cash to closing (to cover the difference between the 2 prices) or void . If the Buyer doesn't have cash to cover the difference, the contract is dead in the water; the Seller has to start over from scratch and the Buyer keeps their earnest money deposit. In order for the Seller to make the decision on whether or not to accept an offer with an appraisal contingency, they need to weigh the risks:

The risk of a lower final sales price
The time lost if the Buyer backs out; it takes, on average, 21 to get the appraisal done
The risk of a "back to active" status which often leaves a bad taste in potential Buyers' mouths

Are you able to put yourself in the Seller's shoes and see why an offer with NO Appraisal Contingency is so attractive?

How does a Buyer know if writing a competitive offer with NO Appraisal Contingency is the right choice? A great Realtor will be able to show you their estimated market value of the home; a Realtor and Appraiser look at the same sold homes to determine value and a good Realtor will know where the risk of a low appraisal starts. If you have cash available above that value, just in case of a low appraisal, then it's worth it to remove the contingency. And by removing the contingency you have a better chance of buying the home rather than just trying to buy it.

Curious what your home is worth? Want to sell your home for top dollar? Looking forward to connecting with you (and getting your home sold)!

Talk soon,

Arynne

PS. Still on the fence about whether or not you’re ready to sell? I totally get it and would still LOVE to talk to you - click here to schedule a free and zero-pressure real estate consultation call with me!