I have been working with a number of Buyers recently whereby the transaction has been very dependent on the appraisal value matching or exceeding the sales price. These transactions have involved the ‘normal seller’ or the seller who is not underwater and who is not an investor but someone who calls the property home.
Here’s the problem highlighted through the experiences of one buyer…
I have written at least 4 offers for this buyer in Tempe and Chandler areas (not all at once). For two of these transactions, the Seller was not willing to budge when the appraisal came in lower than the sales price or showed no inclination when the possibility of a low appraisal came up. The Seller was more inclined to stay on the market in the hopes of fetching a higher value (in a sense, hoping for a stronger appraisal or cash deal from another buyer). As a result, my buyer expended as much as $700 twice only to have the deal fall apart.
Another home they are interested in has the Seller unwilling to budge from their price despite it being clear that the property is overpriced (no other offers for an extended period) and even the listing Realtor feels the price should be much lower.
What’s the Issue Here?
I have listed a home whereby we went through a similar exercise in the past. The end result was that the property sold for about the same as it would have for the original offer that suggested a low appraisal.
I can understand the Seller’s Dilemma here - “The appraisal came in low and so the Buyer wants to re-negotiate the sales price lower, which I don’t want to do, to match the appraisal given their financing. Otherwise, the deal will fall apart.”
But the botton line here falls on the commitment of the Seller to actually sell. I am seeing too many Sellers who price somewhat within the realm of where they should be but are unwilling to budge further as needed to successfully sell. They are holding on again to a value for their home that they feel is appropriate and ignoring that the market and the appraisal are what dictate the final value in our current market climate.
This is surely an uncomfortable experience for Sellers but a necessary one if the Seller wants to move on. We have seen this behavior before in the market downturn and in my opinion, leads to disappointment and frustration.
In the case of my buyer, of the four properties where there was a concern for the appraisal not meeting the sales price that my buyer looked at purchasing, ALL are still sitting on the market and not under contract for purchase.
Normal Sellers Should Consider Themselves Lucky They Can Sell
Normal home sellers who have enough equity in their homes to successfully sell should consider themselves lucky in this market. There are a lot more potential short sales and foreclosures that could be poured into the market and the fact that we have a limited inventory of foreclosed homes means that the market is allowing the normal seller to sell right now.
If these other properties were in the market, there is no doubt that we would see a decline in values and buyer push toward foreclosed homes at the expense of normal transactions. Both of these would only serve to hobble the normal seller’s chances at selling in this market.
Think Three Months Later
The normal seller should consider how they might feel three months later when they have actually sold their home and moved on. Though a difficult choice, there is value in closure and peace of mind.
When there are a lot of foreclosures in the market, the market tends to punish the normal seller and reward the buyer. We have a market that is more balanced than this scenario at the moment. As such, Sellers need to get real, get focused, and commit to actually selling their home.
Email this Post
