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Appraisal Contingency

Revelate
Moderator Emeritus

Re: Appraisal Contingency


@StartingOver10 wrote:

Rev, we don't have a checkbox in our forms for waiving appraisal contingency. We have to have a separate addendum added to the contract to waive the appraisal contingency so it is slightly different here than where you are located. The default position here is that the appraisal contingency is remains in the contract.

 

Also, with our market, it is more common for the buyer to pay some limited $ over appraised value, but the limit is specified as opposed to open ended. With the appraisal contingency waived - you leave that value open ended and that is much more risky for the buyer to do.


What type of buyer typically waives appraisal contingency in your experience?  If they "have to have this house!" or something akin to that?




        
Message 21 of 26
StartingOver10
Moderator Emerita

Re: Appraisal Contingency

When our market was in the 2003 to 2007 timeframe, particularly in 05 and 06, many of the listings had a notation that the buyer had to waive the appraisal contingency. That is when we had all kinds of buyers waiving contingency or they wouldn't get a property. They had to have enough cash so it automatically left out buyers that didn't have the extra cash available. We had such a shortage of properties then that the buyers were worried they would never get a place. 

 

We aren't back to the craziness of that time yet here. We have tight inventory and we are seeing a common appraisal issue (lag of values mentioned earlier) but I haven't seen many buyers completely waive the appraisal contingency. We still have reasonable sellers that will drop the price either to the apprasied value or close enough to the appraised value.

 

On the other hand, we have a fairly high percentage of cash sales here where there is no appraisal. So what we see most often is the listing calling for a cash buyer - no financing accepted. This way there is no appraisal

Message 22 of 26
Marlena
New Contributor

Re: Appraisal Contingency


@Revelate wrote:

@Marlena wrote:

Yeah, I hear you, Rev. My low appraisal story has an amusing and ironic end. After I walked, the seller relisted the house at the same (over appraisal) asking price. That was in March. I checked the listing the other day and the house is now listed at the appraised value, which is what I was willing to pay in the first place. They could have closed our deal, at that price, 3 months ago. The real kicker is that it we were set for a double close that day - our deal was closing in the morning and their closing on their new house (which was contingent on closing our morning deal) fell through because we didn't close our deal. So not only did they lose our deal, they lost their deal on the new house at the same time.

 

I finally just decided that either they or their agent (or both) are just plain stupid. Or greedy. Or stubborn. Or all of the above. Or maybe one of them (sellers were a married couple) secretly just doesn't want to sell the house and move. I don't know. The whole thing made no sense. Maybe I should try your Scotch method of enlightenment to gain some insight into that mess.


Yeah, sometimes people don't do very smart things (myself included, often).  

 

I thought once the appraisal happened right or wrong it stuck with the property unless overridden by another appraisal?  Guess I don't really understand the reluctance to negotiate unless it's in a rapidly rising market... how much over the appraisal was your offer?


Appraisal came in $7000 low, or about 3.5% of the agreed selling price.

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Message 23 of 26
Revelate
Moderator Emeritus

Re: Appraisal Contingency


@StartingOver10 wrote:

When our market was in the 2003 to 2007 timeframe, particularly in 05 and 06, many of the listings had a notation that the buyer had to waive the appraisal contingency. That is when we had all kinds of buyers waiving contingency or they wouldn't get a property. They had to have enough cash so it automatically left out buyers that didn't have the extra cash available. We had such a shortage of properties then that the buyers were worried they would never get a place. 

 

We aren't back to the craziness of that time yet here. We have tight inventory and we are seeing a common appraisal issue (lag of values mentioned earlier) but I haven't seen many buyers completely waive the appraisal contingency. We still have reasonable sellers that will drop the price either to the apprasied value or close enough to the appraised value.

 

On the other hand, we have a fairly high percentage of cash sales here where there is no appraisal. So what we see most often is the listing calling for a cash buyer - no financing accepted. This way there is no appraisal


I do think it makes sense when looked at through the lens of the bubble with rapidly appreciating houses and loan qualification at absurd levels; inventory shortage if you're comfortable paying for the place, just go get the deal... in thinking about it, could characterize my own purchase as that in a microcosm.  I do wonder if the tighter UW standards have driven more customers towards not waiving the appraisal.

 

Desperate measures for desperate times I guess. Smiley Happy  Appreciate the insight though.  

 

I may be something of a hypocrite in thinking about this, whenever I do resell my property I wonder if when I'm evaluating offers whether I'd strictly ignore the appraisal waiver or whether as a seller I'd absolutely use it to my advantage.

 

To be utterly honest, I'm pretty certain I'd use any information the buyer discloses about themselves, and this is a data point.




        
Message 24 of 26
StartingOver10
Moderator Emerita

Re: Appraisal Contingency


@Revelate wrote:

I do think it makes sense when looked at through the lens of the bubble with rapidly appreciating houses and loan qualification at absurd levels; inventory shortage if you're comfortable paying for the place, just go get the deal... in thinking about it, could characterize my own purchase as that in a microcosm.  I do wonder if the tighter UW standards have driven more customers towards not waiving the appraisal.

 

Desperate measures for desperate times I guess. Smiley Happy  Appreciate the insight though.  

 

I may be something of a hypocrite in thinking about this, whenever I do resell my property I wonder if when I'm evaluating offers whether I'd strictly ignore the appraisal waiver or whether as a seller I'd absolutely use it to my advantage.

 

To be utterly honest, I'm pretty certain I'd use any information the buyer discloses about themselves, and this is a data point.


When we are going over offers (especially in a multiple offer situation), we go over all the known information about the buyer's ability to purchase and close. The seller selects the strongest offer, not necessarily the highest offer.  After all, if there is only a $2k or $3k swing between offers, but the ability to close on time (or at all) is not certain, then the seller will usually go with the stronger offer even if they are leaving $2k on the table.  KWIM? Now if you are talking about a larger percentage of the sale (say a $15k or $25k swing), then the seller might go in a different direction.

Message 25 of 26
Revelate
Moderator Emeritus

Re: Appraisal Contingency


@StartingOver10 wrote:

@Revelate wrote:

I do think it makes sense when looked at through the lens of the bubble with rapidly appreciating houses and loan qualification at absurd levels; inventory shortage if you're comfortable paying for the place, just go get the deal... in thinking about it, could characterize my own purchase as that in a microcosm.  I do wonder if the tighter UW standards have driven more customers towards not waiving the appraisal.

 

Desperate measures for desperate times I guess. Smiley Happy  Appreciate the insight though.  

 

I may be something of a hypocrite in thinking about this, whenever I do resell my property I wonder if when I'm evaluating offers whether I'd strictly ignore the appraisal waiver or whether as a seller I'd absolutely use it to my advantage.

 

To be utterly honest, I'm pretty certain I'd use any information the buyer discloses about themselves, and this is a data point.


When we are going over offers (especially in a multiple offer situation), we go over all the known information about the buyer's ability to purchase and close. The seller selects the strongest offer, not necessarily the highest offer.  After all, if there is only a $2k or $3k swing between offers, but the ability to close on time (or at all) is not certain, then the seller will usually go with the stronger offer even if they are leaving $2k on the table.  KWIM? Now if you are talking about a larger percentage of the sale (say a $15k or $25k swing), then the seller might go in a different direction.


Yeah, I would suggest this goes against both my trivial line analysis, and also what dependencies I have in terms of getting out of the place (like contigency my current place sells, ugh) to be able to qualify for another.

 

That's half of why I was sort of surprised at my pre-qual letter's actually working though the seller's agency did do her due diligence.

 




        
Message 26 of 26
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