Why Would I Pay Over Appraised Value to
Buy a Costa Mesa Home?
If you hadn’t heard yet, Costa Mesa is currently experiencing a strong sellers’ market. This means that there are few homes for sale, and those that are for sale are frequently receiving multiple offers over list price.
Many buyers are offering more than past sales would indicate value to be and this causing problems when it comes to appraisals! Some buyers are fine with paying more so that they can finally “win” a property. Why would they do this? They’re tired of losing out to other buyers, and they realize that it’s only around $50/month more to add $10,000 to the purchase price which could make the difference between winning and losing.
So, what’s the problem?
When buyers over bid on Costa Mesa houses, the prices buyers are willing to pay go up faster than the most recent sales. The result is that appraisals come in under the purchase price, and there is a gap between what a lender thinks the home is worth, and is therefore willing to lend on, and the value that the buyer is willing to pay for the property.
The buyer can bring extra money to close. ie. If the buyer was buying a home the appraisal said was worth $500,000, and the buyer offered $510,000, the buyer could choose to bring in an extra $10,000 to make up the difference, if they have the funds.
The buyer could ask the seller to reduce the price to $500,000.
The buyer and seller could meet in the middle.
Nobody can agree, and the deal falls apart.
What’s happening in many cases right now is that the buyers, realizing they may lose out to other buyers, are choosing to bring in the difference if the appraisal doesn’t come in.
What can a buyer do to compete? Choose to bring in extra funds or simply try to renegotiate if the price doesn’t come in if you can’t get the home at current value.
Is this for everbody?
No, it’s not. Some people don’t have the extra funds to bring in to make up the gap. Some people can’t stomach the idea of “overpaying”. What should you do if you can’t/won’t compete in this sellers’ market?
You can choose to wait until the market evens out again, or you can look for other properties that might not receive multiple offers – homes that are in need of repair, homes that are overpriced and have stayed on the market for awhile as a result, etc.
If you would like to know how to best compete to buy a Costa Mesa home in this sellers’ market, please contact
Christine Donovan at 714-319-9751.