When your looking to buy a house and you find yourself in the hottest sellers market in the history of Humboldt County, a little creativity goes a long ways. The biggest hurdle buyers currently face is the amount of competition they have to go up against when making an offer. We are still seeing a fair amount of out of town buyers who are coming in with very strong offers that are well over asking price and a lot of times, are all cash offers. In order to compete with these cash offers, we have seen a lot of buyers who are using a loan going over the top with their offer prices, which can seem like the right move in theory. The real rub from these astronomical financed offers comes from the appraisal process. For example, if a house is listed at $500,000, and you write an offer (with a loan) for $600,000, your looking at a $100,000 gap in the comped value vs the offer value. Don't get me wrong, houses appraise over the listing price all the time, but a $100,000 gap is pretty severe. The appraiser will do their best to find comps so that they can accurately tie the offer value to the property, but sometimes the value comes up short. In the case of a low appraisal the seller has two options, either move forward with the sale at the lower appraised value, or cancel the sale. To avoid this potential pitfall, a lot of sellers have been asking buyers (who are using a loan) to waive their appraisal contingency upon the acceptance of the offer. I would under no circumstance reccomend that one of my clients do that, because that contingency protects you against overpaying for the property. This trend is a good indicator which tells you just how drastic that market has become.
