Sometimes it doesnâ€™t really matter what the offer is if the bank comes back out and appraises the property at less than what they offered.
I figured this may backfire if we accepted the higher priced offer.
Plus, we had a very good idea of what the Carver property was worth and we just knew that we couldnâ€™t get greedy.
But more importantly, there was another player in this whole dealâ€¦the bank.
The bank is and always will be the ultimate â€œwild cardâ€ in any deal you do â€“ especially now. And since this offer $10,000 over our asking price was higher â€“ it was actually more risky to take it.
Higher Offers Aren't Always The Better Offers
Yes, the higher offer was a more risky one because for all we knew, the financing could break down and the bank may reject the loan entirely.
If they did that, then the buyer was out of luck and may need to shop around for different financing.
If that was the case, what would happen to us? Wouldnâ€™t this break down all our carefully crafted numbers and projection?
All good questions.
See this video here to see why the full priced offer was better than the one that was OVER asking price.
Did I Really Give Up $10K?
Not only were we concerned about the bank financing falling apart, but we were also concerned about a few other factors:
- If you have a bank-financed offer, it takes more time to get the money and to close â€“ usually 45 â€“ 60 day if not longer
- An all cash offer would take only a few weeks
So if you take a finance offer, you'll automatically get additional charges to the net profit such as:
- Interest on the promissory note: $1,000
- Taxes: $200
- Electrical and utilities: $200
- Maintenance (lawn care, etc): $150
- Staging costs: $300
- Additional costs $2000
So right out of the gate, we are down $2,000 form that additional $10,000
Not so good.
Best case scenario would be that we made an extra $8000
When someone goes for a loan itâ€™s not just what the buyer and seller agree on a price. There are more people involved than just that 0 especially when dealing with a bank
The bank sends out an appraiser to determine whether or not the property has been sold at a fair market price. The bank (especially now) does not want to lend money on a property that is overpriced.
And if that price comes in below the offer, then we are back to square one.
You can one of two things:
- Kill the deal and put it back on the market
- Lower your price to accept the lower CMA form the bank
When all is said and done, when you can eliminate the inclusion of the bank, then you should take that offer.
Cash offers donâ€™t happen all that often â€“ so when you get one, you should seriously consider it. In fact, weâ€™ll make more money and less stress than we would have.
Let me know what you think? What would you have done?