There are many hurdles in the purchase of a home. Most buyers need to be qualified by a lender to assess their “lendability”, the right home has to be found, the offer needs to be crafted, presented and accepted – and usually an inspection of the home has to be done and repairs negotiated. Whew! Now, after all that, an appraiser selected by the buyer’s lender needs to assess the value of the home. Oops! The agreed upon price is too high according to this expert.
Usually, and by agreement, one of four things happen now: 1) The seller agrees to sell the home for the appraised value. 2) The buyer agrees to come up wit the difference in cash. 3) Depending on the lender and the loan type, a different appraiser (approved by the lender) provides a second opinion or 4) Buyer and seller part company – earnest money returned.
In very “hot markets”, where low inventory and escalating prices have out paced comparable sales, agents are using a newly created MLS for stating that buyers will guarantee they will make up the difference between sales price and appraisal price and that they have the cash to do it. This is often used in Seattle at this time.