WHY THE LAST THREE SALES ARE IMPORTANT TO YOU WHEN SELLING
November 1, 2016 | Richard Sites
When selling your house, it is important to keep in mind that other activity in your neighborhood could directly impact your sale. And even if think your house is “special” because of the nice shelves in the garage and the new carpet in the guest rooms, what your neighbors do directly affects you.
No matter what price you get for your house in the contract, only the appraised value makes any difference if the buyers are getting mortgage financing.
Most sellers think that the big number that shows up on an offer is the amount they will be receiving. And sellers can get excited if this is higher than expected. But the offered purchase price is only a starting point.
If the buyer is getting financing, and most who purchase homes under a million dollars will be, the lender will have the house appraised. Their loan amount will be the lower of either:
- The sale price or
- The appraised value
Lenders will be providing a percentage of this valuation. So, here’s an example where buyers are getting a loan for 80% of the purchase price:
Just as an example, let’s say the contract price was $1 million but the house appraised at $500,000. The sellers are expecting $1 million but the lender will only lend 80% of $500,000. This discrepancy is what kills the deal.
In fact, this morning in Jupiter and Tequesta, 16 new homes came on the market but 4 came “Back on the Market”. In nearly every case this is because of a financing problem.
One experienced agent I know, when making an offer on a house, inserts the clause that if house does not appraise at the selling price, the sellers AGREES to lower the sale price to the appraised value.
Appraisers use the last three nearby sales to determine the value of your home, so the price other houses recently sold for will directly affect you.
Don’t get excited about the contract price, wait for the appraisal to come in. At this point, you will have 3 choices:
- Lower the sale price to the appraised value
- Split the difference between the two figures with the buyer.
- Buyers agrees to pay OVER the appraised value with extra cash or the deal collapses.
Even if you have a cash deal, the buyers could insert an “appraised value” clause in the offer.
Buying and selling are highly emotional experiences so be sure to keep your emotions in check and use an agent who will help with this. Otherwise you will be distraught and upset with your agent.
Question: Have you had a problem with an appraisal?
If you are selling, or thinking of selling, and would like to have a conversation about getting your house sold quickly, I have been helping sellers for 13 years and can help you. Contact me directly at 561.762.4073.