Miami Beach home prices are sometimes hard to justify for buyers and of course, most home sellers want to get as much as they can for their property. However, the price set might not be reflective of other comparable homes in the neighborhood. We are seeing this trend in neighborhoods with high demand. Sometimes this brings sellers to the point of being completely unrealistic and overpricing their homes with vast discrepancies between what has recently sold and what sellers want to sell their property for in today’s market.
In neighborhoods with high demand, this leads buyers to start overbidding just to get a property, and if a buyer needs financing, this can create an issue once the property is under contract. As the seller, you need to be really careful about accepting the highest bid when the contract has a financing and appraisal contingency because although you are under contract, with a great price the buyer could cancel the contract when the appraisal comes back.
The Challenges When the Sales Price and Appraisal Values are Different
For the buyers who need financing under financing contingencies, the bank will send an appraiser to appraise the property. If the appraisal comes in with a value that is below the agreed upon sales price, the lending institution might not authorize the mortgage for the full amount a buyer would need to complete the transaction. That could be a challenge that may prevent the home sale from proceeding to the closing table.
Four Scenarios:
- The bank will not issue the loan with the lower appraised value.
- Depending on the bank the buyer may cover the difference and come out the pocket with the additional funds, if they have the funds to do so and if the bank will allow it.
- The seller and the buyer may have to renegotiate the contract price for the property.
- If none above happens, the buyer can possibly walk away from the sale of the home.
Bottom Line
Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal).
In a housing market where supply is very low, and demand is very high, home values increase rapidly. One major challenge in such a market is the bank appraisal. If prices are jumping, it is difficult for appraisers to find adequate comparable sales (similar houses in the neighborhood that closed) to defend the price when performing the appraisal for the bank.
With escalating prices, the second sale might be even harder than the first.
This is why it’s important to use an experienced real estate professional to help set your listing price as well as help you sift through the offers that come in to be sure you accept the best offer and the one the best chances of closing in the end.
