There was a list of “crazy situations” that are the result of the heated housing market. In this blog I will discuss the fact that many owner-occupied homes are currently being purchased above the asking price.
Buying above the asking price is not always a problem, but if buyers are not fully aware of the consequences. A mortgage adviser and a buying broker (but also a selling broker) must point out to a buyer the disadvantages of buying above the asking price. This prevents a lot of irritation for the buyer and prevents the seller from being told later that the purchase is canceled.
Own resources needed
I therefore have a very clear message to my customers who want to offer more than the asking price. I explicitly indicate that they must be able to pay the amount above the asking price from their own resources. If they do not have this amount available or cannot prove it (by handing over bank statements, for example) I advise them not to offer my customers. My way of thinking is as follows:
- Asking price of a house for sale 200,000 euros
- Client offers above the asking price and buys the property for 220,000 euros
- I now assume an appraisal value of 200,000 euros
- The customer must now contribute an additional 20,000 euros from his own resources outside of the buyer’s costs
Purchase price the same as the appraisal value?
Of course my thinking is that the appraisal value is the same as the asking price short-sighted. It is quite possible that the appraiser (who is required for the mortgage) estimates a higher or lower amount. However, I know from practice that a lower appraisal value (almost) does not occur. If the value is also lower (for example 190,000 euros in my example) then the buyer can still cancel the purchase. A higher appraisal value occurs very regularly. From my point of view, this is an advantage for the customer. This customer then has to contribute less own resources if, for example, the appraiser has valued the value at 210,000 euros.
No own money? Angry customer …
In practice, buyers often assume that the purchase price is also the appraisal value of the purchased property. Many buyers are therefore very irritated when the appraisal value turns out to be lower. It often happens that buyers then do not have enough resources to be able to buy the property. They will then perform all kinds of tricks to be able to demonstrate the required own resources. A mortgage advisor who 100% follows the rules, must then tell his client that he / she cannot get the mortgage. The result: an angry customer and nobody is waiting for that.
Good explanation by the parties involved
If everyone explains very clearly in advance to a buyer what the consequences are if he wants to buy above the asking price, we will prevent many problems. Not only angry customers, but also appraisers and mortgage advisers who are going to do things that are not allowed according to the rules.