Need to sell a house fast in Palm Beach? This is easy with a cash offer. Skip the appraisal contingency to speed up the home sale process!
The Appraisal Contingency: How It Works to Protect Buyers And Lenders
To understand why cash is preferable to mortgage financing first you must understand home appraisals and the “appraisal contingency.” A “home appraisal” is an estimate of property value completed by a “certified” or “licensed” appraiser. Appraisals are paid for by buyers or lenders. The appraiser walks through the property and issues a written report in about 7 business days. Mortgage lenders demands appraisals because the property serves as the collateral for the loan (this covers them if the buyer defaults). Appraiser’s opine on value by comparing your house to local comps and adjusting based on square feet, number of BR/BA, year built, condition, and location.
Purchase and Sale Agreements, relying upon mortgage financing, universally contain an “appraisal contingency”. A contingency is a contractual provision specifying the contract is terminated upon the occurrence of a certain event. In the case of the appraisal contingency, the real estate contract may be terminated at the buyer’s discretion if the appraisal is lower than the minimum specified value, and, the buyer is entitled to have his earnest deposit returned to him. Similarly, a low appraisal results in the mortgage lender denying the mortgage and the buyer may legally cancel and get his deposit back via the financing contingency.
The appraisal contingency protects buyer and lender, at the expense of the home seller. Here’s how it works in the real world: you and seller agree to a price, and enter a contract with an appraisal contingency. Weeks into the sale, an appraiser gives his “professional” opinion that the market value is lower than the agreed upon priced. At this point, you either need to accept the lower price or start the entire process over again. Makes no difference that you and the seller had agreed on that price. This is perfectly fine with the buyer: they get their deposit back and move on. No loss. As the seller, you wasted time, continued paying maintenance, taxes, insurance, and are no closer to selling your house. The appraisal contingency brought your sale to a halt.
How Cash Offers Solve The Problems
Home buyers making cash offers rarely use appraisal contingencies. The appraisal contingency is not necessary for cash buyers since there is no mortgage lender demanding it. Since the buyer is in control of the cash, it’s only the buyer’s opinion that matters. Inexperienced cash buyers might insist on an appraisal to give themselves an “exit” with their deposit if they no longer want to buy at the agreed upon price. You can request they waive this contingency or use a lower minimum specified value so they have less wiggle room to cancel. There is no guarantee they agree.
A professional cash home buyer in Palm Beach would never use an appraisal contingency. Give us a call (954) 676-1846 or fill out the form for a cash offer without an appraisal contingency. We have proof of funds bank statement showing our cash reserves available. If you need to sell ASAP, this is the best option.
Of course, not all real estate investors are created equal. You can have peace of mind working with House Heroes. We are accredited by the Better Business Bureau and have video testimonials of satisfied clients, like this one from Mr. Craig Meeks:
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