Is it wise to try to sell your home as for-sale-by-owner? Let’s take a look at why or why not.
What are some of the challenges sellers currently face in our market?
According to Dane Hill, our director of operations who has extensive experience in transaction management, one of the biggest challenges is appraisal issues. There is a lot of demand but not a lot of track record of homes being sold for the prices which the current market warrants.
For example, we can encourage a client of ours to list a home at $375,000 and they can get an offer for $395,000, but once the buyer tries to get an appraisal done to satisfy their financing obligations, the appraiser won’t have enough track record of other sales at that price to warrant that $395,000 offer. The lender will only lend at what the home appraises for, so in this situation the buyer has to come up with the extra cash to close the difference or both parties have to renegotiate the sale price so the buyer can close on it.
Each home sale is unique, but the most common way to settle a low-appraisal situation like this is for the buyer and seller to meet in the middle between what the offer price is and where the appraisal came in at.
The seller typically loses some concessions during this process. If they’re paying the buyer’s closing costs, then they’ll remove those from the contract and/or drop the home warranty or other repairs they’d previously negotiated. In return, they’ll drop the price so the buyer can get the loan and close on the property.
If both parties can’t find some common ground to make the sale work, the buyer will usually cancel their offer and the seller will relist their property for another buyer who perhaps has more cash or is in a better financial situation.
I want to give special thanks to Dane for joining me today to discuss this topic. There are other potential solutions to this problem that we didn’t get into, so if you have any questions about this topic or you’re thinking of buying or selling a home, don’t hesitate to reach out to us. We’d be glad to help.