Kaplan University School of Professional and Continuing Education Kaplan University School of Professional and Continuing Education

The Downside of an “Up” Real Estate Market

Posted by: Mary Joyce Cable
Updated: December 29, 2017 

Though it is true that the real estate market is always changing, the recent stagnation experienced since the recession of 2008 seemed never-ending. Yet the tide has definitively turned. Brokers and their clients do not hesitate to describe 2015 as a seller’s market in North Carolina. In some areas, buyers’ agents have a hard time competing for available properties because the inventory of homes is so low. If their clients can’t view a listing on the first day of marketing, they may not even get a chance to bid on the property.

This sounds like an ideal development for listing agents whose chances of selling homes quickly are high. But there is another factor that complicates the dynamism of this scenario. Sellers who have waited for the market values to rise are now listing confidently at higher prices and waiting for multiple offers to pour in, and they often do.

An executed contract, however, has some hurdles to overcome, and this has nothing to do with inspection and repair negotiations, as one might assume. The big question mark for non-cash buyers in this market is whether or not their target property will appraise for the agreed-upon price. The comparable sales data may or may not allow appraisers to match the offer price, and there’s the rub. If buyers do not have enough cash on hand to make up a discrepancy between the offer price and the lender’s appraised value, they may have no choice but to terminate the offer and continue looking.

This phenomenon can cause a cascade of misfortunes. Because buyers are often paying more due diligence money to distinguish their offers, they stand to lose hundreds or even thousands of dollars with each such situation. Though sellers are not as adversely affected due to these small financial gains, they do lose time with each uncompleted transaction, and this may well affect their net gain in the end.

A buyer’s agent is wise to help limit a buyer’s “skin in the game” by trying to schedule inspections after the appraisal has been received. This cuts into a buyer’s window of time to negotiate inspection results, but it can prevent an even greater financial loss for one’s client.

To order the lender’s appraisal on day one of an executed contract, buyers should have all required documentation sent to the lender before the property hunt begins. This step saves unnecessary stress for both the buyer and lender. This has always been true, but now more than ever.

Mary Joyce Cable is an instructor in JY Monk’s Raleigh location. She has practiced real estate since 2004, first in Atlanta, GA, and now in the Triangle. Teaching budding realtors feels like an extension of her love of helping first-time buyers, a process she continues to relish as our beautiful state expands and flourishes.