Here’s how waiving the appraisal addendum can strengthen your offer.
As a buyer, you can strengthen your offer tremendously in this market by waiving the appraisal addendum.
First, let’s define the appraisal addendum. This addendum allows you to waive your right to cancel a contract if the property appraises for lower than the offered price. For example, let’s say you and the seller enter into an agreement for you to purchase their property for $400,000. In the appraisal addendum, you’ll declare your intentions if the property appraises below $400,000. If you waive the appraisal and the property appraises for, say, $390,000, you’re basically saying you’ll cover that $10,000 gap. If you don’t waive the appraisal, what happens next is up for negotiation.
Essentially, waiving the appraisal gives you an advantage over other buyers because you’re ensuring sellers that they don’t need to worry about renegotiating in the event of a low appraisal. I normally wouldn’t advise buyers to take on this strategy, but in a strong seller’s market like this one where any home listed under $400,000 receives 15 to 20 offers the very first day, you need to make your offer as strong as possible.
In this red-hot market, buyers are hardly giving any thought to price because they’re securing such low interest rates (2.6%, 2.7%, etc.). The challenge is actually getting the contract, so getting a contract is akin to securing a deal. More and more buyers are waiving their appraisals, so you’ll have to compete in the appraisal world as well, just in case the offer comes in lower.
As always, if you have questions about this or any real estate topic or are thinking of buying or selling a home soon, don’t hesitate to reach out to me. I’m happy to help.
