Is Your Buyer’s Agent an Asset or Liability?

Is Your Buyer’s Agent an Asset or Liability?

So, you’ve bought and renovated a little house, and just listed it on the market. Your investment property is a 3/2 in a modest but upcoming neighborhood. A great starter home for a young family. You’ve done a good job – and the market is hot – so several offers come in quickly. One, as is typical, is a very low-ball, “as is” cash offer. Another is a little lower than you wanted to accept, and the buyer is prequalified for a conventional loan. And, a third offer comes in several thousand above the asking price! And these folks are also pre-approved – for a VA loan. 

In analyzing this deal, right away the savvy investor will want to investigate the highest asking price offer. When a house has multiple offers, making an offer that is higher than asking price can be a good strategy for the buyer to come out on top.

It’s tempting to accept the highest dollar offer. Obviously more money is better. But, is the buyer’s agent guiding them towards a deal that can be closed? 

In this particular scenario, the buyer’s agent may not have taken the time to explain to their buyer how the process works. As you know, the house must appraise at a certain amount for the loan to go through. When a buyer offers above asking price, he is definitely taking a chance that the appraisal will not match the offer. 

In some cases, the buyer and his agent is well aware of this, and it’s worth the risk to them. Perhaps the agent has discussed it with their buyer, and knows that their buyer has sufficient cash on hand to make a larger down payment and close the gap if the appraisal falls short.
This sort of scenario is more common on a high dollar home than on a smaller starter home.

If your buyer’s agent is savvy they will have informed their client that typically a VA-approved loan will appraise on the low side. This is because the VA fully backs the loan, and doesn’t want to be caught short, so their appraisal process is cautious. This being the case, is the buyer prepared to pay a higher down payment?

Has the buyer’s agent suggested their buyer offer high to “get” the home, without explaining to them what may happen? If so, this real estate agent is letting down their buyer and you, the seller, as well. If the appraisal comes in low, as it likely will with an above-list price offer AND a VA loan, then the deal won’t go through without more cash on the table.

Unfortunately, there are lots of real estate agents out there, but not all of them are really tuned in and guiding their clients as they should. When considering your offers, look at more than the monetary value of the offer. In this particular scenario, the investor could probably close the deal easily if he takes the slightly below asking price offer, with an approved Conventional loan, and move on to his next deal with a profit in his pocket.