The last several months has seen a steady climb in the use of the “low appraisal addendum.” What is it? This addendum obligates a buyer in advance to pay MORE than the appraised value. Why would anybody do that?? Because buying is so competitive right now that many homes are not appraising at value! You would think this would be a great thing for buyers (a protection) and it is, but then enter this addendum. This addendum allows buyers to submit a MORE COMPETITIVE offer by promising a seller in advance that if the property does not appraise, the buyer will pay more than the appraisal value. The buyer sets that amount in their initial offer. Remember that lenders won’t lend above the appraised value so that’s EXTRA cash you need to bring to the table. Of course, if it appraises at your purchase price value, the addendum doesn’t apply.
SOUNDS TOUGH TO BUY RIGHT NOW?? Not necessarily. This doesn’t happen with every home on the market. It largely depends on the location and type of property you want. PLUS, with interest rates so low, it’s worth giving it a shot if you can get into a home and start building your own equity instead of your landlord’s!
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1% Real Estate Broker – The New Normal™