Mortgage and Real Estate Blog


High Offers Offset By Low Appraisals - Fair And Balanced? Or Unfair?


Mad GirlWith the amount of offers coming in on REO properties(Bank Owned Properties), there has been a new trend among buyers. The trend is to just offer as high as possible to get the property under contract. After the contract is accepted by the bank, they have to get an appraisal for the loan.

The appraisal comes in quite a bit lower then their original offer price, which means the buyers won't be able to get the financing. These buyers then have the right to withdraw from the contract based on the appraisal contingency. The deal is dead right? 

Not so fast. The buyers agent has been planning this all along. The agent and the buyers will submit an addendum to the price to meet the appraisal, and will re-submit to the bank.

Now, the bank wants to get this deal done, and knows the same thing will happen with any other buyer. The appraisal has already been done. So, the bank just accepts the lower price, and the buyers get away with it. They knew the appraisal would not meet the original offering price, and they get a great deal.

With the new appraisal guidelines, this is happening more and more.  Appraisals are coming in low, buyers are aware this is what's happening, they are offering high to get the property over the competition, and just wait out the appraisal to get a great deal.

How fair is it to the buyers that put in an offer closer to asking price?  Is this fair and balanced? Is it unfair to the other buyers that put in a reasonable offer? Or is it a smart way to get your buyers the house they wanted?

Comment balloon 2 commentsJoseph Metzler • November 04 2009 09:40AM


We agree.  Good Article.  We learn a lot of new things from Active Rain blogs.

Posted by Edward & Celia Maddox, EXPERIENCE & INTEGRITY - WE TAKE THE HIGH ROAD (The Celtic Connection Realty) about 11 years ago

This does seem like a very unethical practice.  I understand though why someone might try this though.  Banks make it difficult on potential buyers of REOs.

Posted by Charles Perkins (Charles G. Perkins, CPA) about 11 years ago

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