Buyers offer much higher than listing price, appraisal problems?

Question

I am selling my primary residence, and have come into what I feel is a somewhat odd situation. My wife and I listed last week, the home is over-improved for the area, so we knew we may get a lot of activity. We actually received our first (and so far only) offer of $14,000 over asking, the very next day! We are trying to decide if this is a sketchy tactic on the buyers end, because we don't think it will appraise at that price, or we would have listed it at that. They also wanted us to pay their closing costs and cover a 1yr home warranty, which was supposed to tally at $4500.

They were also very aggressive on wanting us to accept literally within an hour or two, as my agent didn't call us until later that evening, or the deal would be off. Plus, only the husband had seen it in person, the wife "saw" it only through Facetime. We thought that was odd as well, to make that kind of offer without both seeing it.

Are we right to find this suspicious? We feel that they are trying to woo us by throwing this high offer at us (even knowing they were the only offer), and then planning on playing us when the appraisal came back probably a bit lower then our asking, their bank not lending them what they "want", and then expecting us to accept a lower number (essentially our asking price) from them because we will have been weeks into the process at that point and not want to go back on the market?

Are we right to see the appraisal and lending process go like that?

I am speaking in the past tense because we didn't think this felt right without the wife not seeing the house as well, they supposedly got offended we weren't jumping at the high offer, and pulled it. A day or two later, they let our agent know that they wanted to see it again with the wife, which was today. We have not yet heard if there will be a new offer. To be honest, we aren't sure if we even want to deal with these people even if they come back with something closer to asking. Or are we overthinking this? Thanks for the help!

Chris Mason · Answer

....if the difference is small enough, they can do a 95% LTV loan, not a 90% LTV loan. Unless you are at the very tippy top of their purchasing power in terms of DTI, that will not be an issue. $100k contract price, 90% LTV loan.Oh noes, appraisal comes in at $97k.95% of $97k is $92.15k. Down payment of $10k can remain unchanged. They only want to borrow $90k, which is less than $92.15k, we just have to change the name we give this thing and slightly adjust pricing... now we're calling it a 95% LTV loan.PMI goes up a little bit because we're doing a 95% LTV loan instead of a 90% LTV loan.That's all.Deal still closes and closes on time. No fuss, no muss.BPers are so caught up in the super high level complex and difficult stuff, I feel like you guys sometimes forget the basics. :PDown payment is irrelevant, that's for Average Joe consumers to think in terms of. You folks should be thinking in terms of LTV, never down payment.

Mark Pierce · Answer

Yep. Offer was $246k. Appraised at $243k. Seemed a little silly. Thankfully it only took a sentence in the contract to make it a non-issue for me.

Mark Pierce · Answer

We had a similar sell of our primary residence last year. The realtor put a clause in to the extend of "if the house doesn't appraise for the offered amount then the buyer is responsible for the difference". Worked wonderful because the house appraised 3k less than the offer and they had to make the difference.

David Faulkner · Answer

How was the financing in the offer? Were they putting a lot down or FHA type financing ... if they are asking for closing costs I'm guessing they don't have much capital. I actually ran into a similar "problem" with an offer way over asking that I thought the property would not appraise for. I gave the potential buyer two options, either they eliminate the appraisal contingency on the offer or they have their earnest money deposit go hard (non-refundable) after 10 days in escrow. I wouldn't normally be able to demand such things, but since I had multiple offers and my RE market is so hot, I was able to get away with it. They chose to remove the appraisal contingency, and having seen their financials I was confident that they could bring more cash to the deal to cover any gap between the appraisal and their offer. Just closed that deal this week, so it worked out well. If your buyers don't have the capital to do this, the tactic may not work for you.

Account Closed · Answer

David, thank you for the info. We had discussed that same idea of removing an appraisal contingency if we had gotten further into it with them. Glad to know that is a worthy option to consider. Yeah, right now, we have no idea what funds they have to use or not use. Thank you again.

Account Closed · Answer

John, we were told they are only putting 10% down, so it seems they would have been at the mercy of their lender? We would think the lender would want them to come up with extra cash to cover the discrepancy between appraised price and their offer price, which could be as much as $25,000. If they were only doing 10% to start off with, we are nervous they wouldn't have the extra funds. Speculation I know.

Chris Mason · Answer

$3k short, if it's a property north of $200k or more, is just a nasty thing for the appraiser to even bother with.

Russell Brazil · Answer

Well how well does your agent work with appraisers. Im not sure the price point we are talking about here, but I wouldnt have a hard time getting an appraiser to get an extra $14k higher on the appraisal. It is all about know what comps to choose, and how to value or devalue certain features, and understanding the condition scale etc.I would be leery though of placing it under contract with a buyer who has not seen the property. I only do this if there is a high enough EMD and no contingencies attached to the offer.

Colleen F. · Answer

I can't speak to the appraisal issue but you might consider their time to inspect and close. if they put a long time until closing I would not accept it because if their financing doesn't work you have more time off market. Also do they ask you stop marketing the house? People play all kinds of games- look at the merits of an offer. Offended shouldn't be part of the equation especially for a buyer.I would say that some people have looked at enough houses to know and make a choice so the wife not seeing would not worry me as much, she could be out of town. work on a good counter if you don't like the terms that is something your agent should help you with.

Brent Coombs · Answer

If it's the best house in the street, why WOULDN'T it appraise higher than "comps"? Sure, if you just spent $40k on a new kitchen to your peculiar tastes, don't expect all that back, but...