Your listing has been on the market for 60 days. Finally, you get an offer. The sellers aren’t thrilled, so they counter for $3,000 more. The buyers accept.
Everyone is on pins and needles as you wait for the appraisal.
Your heart sinks.
The appraisal is a mere $3,000 lower than the accepted offer.
What can you do to save the sale?
I reached out to colleagues at Inman’s Agent War Room for their take on this situation. I wanted to know how I should handle the case and how I could be in better control for the next negotiated sale.
A complicated sale
The appraisal report discounted recent improvements and calculated a smaller square footage than the tax records indicated, which set the value at $375,000.
To further compound the complexity of this sale, the sellers didn’t agree with each other. The wife wanted to sell immediately, but the husband took the appraisal shortfall personally.
To try to keep the negotiations going, the buyer reluctantly agreed to meet in the middle, and added $1,500 to the deal.
The husband seller accused the buyers of “playing games,” insisted the buyers needed to make up the difference and wanted to scotch the deal. He was ready to put the house back on the market for another three months.
My options were to ask the buyers to make up the difference, ask the sellers to let the $1,500 go, split the balance with the buyer’s agent out of our commissions or cough it up myself.
Considering the buyer’s side of the equation, splitting the balance was a choice that could cement buyer loyalty in the future.
Agent Karen Stuart Baum of Kansas City, Missouri, recalled a similar experience. In her situation the seller came down, the buyer went up, both agents kicked in, and it was a win-win for all.
However, the buyer’s agent confirmed the buyers wouldn’t offer anything more.
I asked the buyer’s agent to contribute half of the difference to make the deal, and she politely refused.
I was fed up with the sellers, the buyers and the buyer’s agent.
It’s frustrating to reward the stubborn sellers in this position, said agent Suzanne Backstrom of Oklahoma City.
How was I going to overcome the sellers’ objection to accepting the new negotiated price? What if the buyer withdrew the difference and stuck to the appraised value after all?
The buyer’s agent had made their position pretty clear.
Was the burden in this case strictly on my shoulders as the listing agent? It certainly started to feel that way.
What was the next step?
Should I come up with the money myself, or should I stand firm and let the parties make all the concessions?
Several agents in the Facebook group agreed that I should standup for my commission.
Don’t negotiate against yourself.
Agent Mary-Catherine Smith of Cary, North Carolina, said, “Don’t offer up your paycheck.”
Others said that it’s better to save a deal by contributing.
“Do what you think is right, get the deal done, and move on. Your time is worth more in the end,” said agent Carl Vanderlaan of Brighton, Michigan.
That last point hit home. Time has a cost. I had to decide the best way to spend my time in this situation.
A little personal growth
Many of my agent colleagues thought that contributing commission to save a sale was a no-brainer.
“It’s your seller client. You need to seal the deal,” associate broker Mitchell Hall of New York City said.
In avoiding future low appraisal traps, Hall suggested doing what he does: putting in the contract that the buyer pays the difference on a low appraisal.
Branch manager Jeremy Lehman of Anaheim Hills, California, asked, did you educate your seller at the beginning of the transaction about appraisals? Did you ask the seller questions like: What will you do if the appraisal doesn’t come in and the buyer wants the appraised value?
“It’s all about asking great questions and then creating a solution,” Lehman said.
OK, I thought, this one is on me.
These were my takeaways for next time:
- Educate sellers at the time of listing: Be sure they know the possible outcomes of appraisals, and make note of how they say they will respond. They may need to be reminded later.
- Consider the circumstances carefully: Is the seller truly motivated to sell? Is the buyer totally committed to this property, or is it one of several they can choose from?
- Evaluate the time element relative to the market value as appraised: How much more time should be put into marketing this property? Is a better offer realistic?
- Create a file of closed permits, receipts for recent home improvements and assessor’s records: Measure the living space when possible. It may help get a low appraisal reconsidered.
- Remember to treat business as a business: As agent Jodi Beekman of Columbus, Ohio, pointed out, “It is our responsibility to guide our clients through a transaction and advocate for their best interest … not to fund the purchase out of our professional fees.”
- Demonstrate leadership, and take responsibility for resolving the situation: Sometimes agents have to come up with creative solutions to get the deal done, even if that means kicking in a little commission.
How did it all turn out?
With one seller angry and the other very upset if the deal fell through, a decision to keep things moving forward needed to be made quickly.
The buyer’s agent was within her rights to not contribute to make the sale. She did accomplish getting additional money put down by the buyer, which was no small task.
With no advantage to putting the house back on the market for an uncertain future outcome, $1,500 seemed like a small price to pay to get the deal done. So that’s what I did. All parties agreed, and the sale closed.
Paul Krebes is a Realtor with ShowcaseMiami Realty in South Florida.
