Avoiding Appraisal Minefields
We may be small, but we’re slow.
–Cal Tech football team slogan
Once upon a time, when the credit spigots were wide open, Buyers’ financing didn’t much matter to Sellers: at closing, they received cash.
With fewer, strong Buyers out there, tighter credit, and more appraisal minefields to navigate, there is a strong — even exaggerated — stratification amongst different types of Buyers’ offers.
Here’s the hierarchy, in order of desirability from a Seller’s perspective:
Good: Financed, with 20% down (the more down, the less risk of appraisal problems)
Acceptable: Financed, with a small(er) downpayment.
Contingent: Hey, it’s a start — and it may attract other offers!
Different Financing . . . Different Prices
To entice Sellers to accept a contingent offer — that is, one where the Buyer must first sell their current home — Sellers typically require some compensating enticement.
Surprise, surprise . . . . that enticement is usually a higher price.
How much higher?
The rule of thumb amongst Twin Cities Realtors these days is anywhere from 6% to 8% (an offer that is contingent and low is a non-starter).
Conversely, that means that cash buyers can expect to get a hefty discount, perhaps as much as 10% now.