Should a buyer remove the appraisal contingency upfront?
In our fast-paced, multiple-offer market, many sellers are now asking buyers to remove their appraisal contingency upfront. This has happened with 3 of the past 10 offers I’ve written, and has left buyers feeling very exposed.
Interestingly enough, not once was there any mention of also removing the inspection contingency, essentially leaving the buyers (and their earnest money deposit) with some protection, and an out. In these cases, I heartily recommend getting the appraisal immediately, and if/when that works out, then ordering the professional home inspection. Since the appraisal and the home inspection are both non-refundable, out-of-pocket, upfront costs for buyers, it’s smart to evaluate the order in which you proceed.
Here in La Mesa and throughout San Diego, most serious sellers have plenty of offers to choose from and they are calling the shots. Since most sellers were once buyers, they may understand that buyers usually stretch and offer to the top of their price range, and only a handful will be able to make up any large difference between appraised value and contract price. Some sellers are asking the buyers to make up this difference, and when this request is done upfront on the counter offer, it’s a difficult decision, because none of us will know until later what the appraised value will be.
Almost a third of incoming offers are cash, so buyers need to carefully consider the best ways to create a winning, competitive edge. If you can still maintain a comfortable level of protection, releasing the appraisal contingency upfront might be a workable option. This would definietly be something you would also want to discuss with your lender.
2013 Barb Fischer San Diego La Mesa
La Mesa, CA San Diego, CA