An Alternate World of Cash Offers and Waived Appraisals

Our new norm: cash offers and waived appraisals.

20K, 40K, 60K over asking… If you're scratching your head, good...

Creativity is the name of the game right now. Most of us require the bank or Uncle Sam’s assistance. Whether it's conventional, FHA, VA, or down payment assistance, your lender is going to require an appraisal.

In the current environment, there’s a good chance the property will not appraise. Appraisers are wary of current market prices and working cautiously. Lenders cannot lend past the appraised value of a property because of the associated financial risk.

At this point, buyers have several options:

1. 1. Pay the difference in cash (off to the mint to print more money!)
2. 2. Negotiate with the seller
3. 3. Pull out as per the appraisal contingency and return the earnest money

For a buyer to go through all this headache to have a deal fall through is not fun. While negotiating the purchase contract, I suggest adding an extra piece to the appraisal clause. Say the seller lists at $600k, but you think the property is worth $540K at most. Your agent can get creative and offer $500k with a stipulation in the appraisal that you will:

1. 1. Pay $500K if the appraisal comes in lower than $500K
2. 2. Pay 50% of the appraisal price above $500K. (For example, if the property only appraises for $560K, you would meet the seller at $530K.)

This helps you cover your tail and poses a fair deal.

Not every listing agent or seller is going to entertain an offer like this. The name of the game as an investor and even just a regular buyer is protecting your investment. Valuations are so high at the moment so creativity is needed at the negotiations table

*I am a licensed agent in the state of Arizona. I am not a financial advisor, tax specialist, or lawyer. The statements made above are personal opinions, not material facts. All information above should not be acted upon without proper review from legal, financial, and tax representatives.