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All The Cool Kids Are Offering To Pay Over Appraised Value These Days |
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Escalation clauses are so YESTERDAY!?! ;-) Not really -- many/most buyers are still using them -- but they don't matter much if an appraisal is going to rein a sales price back in... Consider these three offers on a fictional home listed for $300K...
Hooray, the house sells for $355K to buyer #3, right? Well, probably... though if it then appraises for $300K, then none of the offer prices over the list price or the escalation clauses really amounted to anything. Thus, these days, many buyers are not only asking themselves how high they are willing to go with an escalation clause -- they are also asking themselves how much above the appraised value they are willing to pay for a house. Consider, then, the following three offers on the same house listed for $300K...
Clearly, a seller would toss out the first offer. Some sellers would then immediately jump to the third offer, since it is $10K higher than the second offer -- but -- that depends on your best guess as to the appraised value of your house. If you listed your home for $300K, presumably you think it should sell for around $300K and thus might appraise for $300K. If that is the case, then the second offer above is likely a better choice for you. That offer would stay at $325K even if the appraisal came in at $300K, whereas the third offer would start off higher at $335K but would then drop to $310K if the appraised value were $300K. So, as a buyer -- consider how much above the appraised value you are willing to pay for a house when you are competing with multiple other offers -- and as a seller, consider how an appraisal will impact each offer that you might accept. Recent Articles:
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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