Tuesday, April 27, 2021 - by Robert Backer, 2020-2021 President, Greater Chattanooga Realtors
Last week, we viewed from a homebuyer’s perspective the potential risks of making sight-unseen offers. This practice is becoming more and more common, and it makes sense why. Realtors, myself included, haven’t seen this level of competition in a very long time, if ever. Buyers are looking for any way to get an advantage over someone else’s offer, and to many folks, making a sight-unseen offer seems practical.
Yet, buyers aren’t the only ones facing potential risks.
Let’s consider a scenario from the viewpoint of a seller looking to get the most for their property. You’re ready to commit to a realtor as your listing agent, but before you entertain showings and offers, there are a few cosmetic issues you want to address. You and your realtor sign a listing agreement, including an addendum to enter your home in the MLS and market it as being available for showings in the near future.
A buyer looking in the price range of your listed asking price learns from their realtor that your home is “coming soon.” After not being successful with other recent offers, the buyer decides to make a sight-unseen offer on your home for well above the asking price. The buyer’s offer is contingent upon securing financing and the home appraising at or above the contract price.
As the seller, you are surprised to get an offer before you’ve begun to allow showings. Your realtor explains they are obligated per the Code of Ethics and licensing law to present all offers, unless the seller waives the Realtor of this obligation by providing written instructions to hold offers until a specific date and time.
You think, “That was easy. I didn’t even have to straighten up each morning for several consecutive days in preparation for daily showings. And I got well above asking price.” Or did you? How you negotiated the contract will determine whether you are obligated to sell at the appraised value, which could be the same, more, or less than the contract price.
For the sake of this scenario, let’s say the sight-unseen offer you accepted was for $50K more than list price, and the appraisal comes back only $15K above asking price. While there is no crystal ball, it’s likely, especially in this low-inventory market, had you waited for showings to begin and other buyers to make an offer, things may have played out differently. Perhaps there would have been an all-cash offer at $15K or more and with no financing or appraisal contingency. Or maybe another buyer could have closed sooner, only needed to finance a portion of the asking price, and their offer was contingent on the home appraising at or above the required loan amount.
Another term to consider is whether the sight-unsee offer turned contract is contingent upon the buyer previewing the home. Talk with your realtor about how to negotiate this contingency, what time frame makes sense, and your rights and obligations once the buyer sees the home.
As you can see, “highest and best” doesn’t always mean the highest dollar amount. Talk with your Realtor during the execution of the listing agreement to discuss and agree on how to handle sight-unseen and multiple offers. You’ll want to make these decisions with a clear head and before you’re in the middle of the excitement of reviewing any offers.
Realtors are bound to a Code of Ethics, which includes strict outlines on how transactions are to be handled. Consult a Realtor to make sure that you’re covered on both sides of the transactions. Realtors work for homebuyers and sellers every day. That’s Who We R.