We went ahead with the sale of this property, not surprisingly with the agent who put serious work into the research and suggested the higher price. After 12 days from the first showing, (with several of those days having the house unavailable for tours due to tenant’s night shift work requiring sleeping during day,) we are under contract at over 97% of asking price, cash, no appraisal. $30K earnest money.
This was the first house in the neighborhood to go on the market for over $500K, resulting in quite a bit of push back from local agents. They did not believe it would have a problem appraising, but had a hard time breaking that dollar barrier in their minds. For some reason they had no problem paying $400+K on a property that required another $100K to update it, but paying over $500K for an updated larger property was a mental challenge for them. Be aware of that potential challenge if you are breaking barriers in your neighborhood.
The initial offer requested a home inspection for informational purposes only. This is intended to assure the seller that they will not be nickel and dimed over small repairs, but in truth what it offers the buyer is an ability to back out of the transaction for absolutely no demonstrable reason, leaving the sellers with a property that has been pulled from the market and now other buyers will wonder why the buyers backed out. A friend recently dealt with this in selling one of their rentals, with the information only inspection buyer coming back at them for a reduction in price based on small items. We insisted on and got our buyers to agree to an inspection where they accept the first $5K in issues, which eliminates the free pass on change of mind and avoids penny ante renegotiations. We are in a very short sales opportunity when incoming medical professionals need to find a home before their contract starts in June, and being pulled out of this market for even a short time could be catastrophic.
Great results aside, we have noticed a shift even in our crazy good market, and wonder if it indicates tougher times ahead for selling a home. More than one potential buyer asked about cost of utilities, which I would expect more on a starter home. We put together a spreadsheet of our utility costs for the last year we lived there, including a usage chart for the year so that they could see how the costs from 3 years prior would translate to today’s costs. Our Realtor noticed a significant increase in buyers getting cold feet and pulling out of contracts, though when I looked at the properties this was done on, it was mostly the starter home market. It seems pretty clear that the lower end of the market is feeling the economic pinch of rising mortgage rates and general inflation. If you are looking to sell, do so quickly. This will get worse, IMO.
With the high earnest money, no appraisal or mortgage clause and buyer’s eating the first $5K on appraisal, I do not anticipate problems, but still will sleep better when this sale closes. They get the rent from the tenants when we close, so there is a profit motivation to closing earlier for the buyers. The sooner the better for us too, since we still have some capital gains exclusion for taxes on this property, having lived there 2 out of the past 5 years. That ends mid August.