Big numbers are being recorded in the Santa Clarita real estate venue. Sellers could not be happier, and even though home buyers are paying more than prices have ever sold for in the SCV, they too are happy to be paying, in some cases, sub 2 percent interest rates for a 30 year fixed mortgage with a 3.5% down payment.
Back in 2006 and 2007, there were homes that were increasing in value from month to month, some increased an obscene amount.
Since those days a different system of checks and balances was developed related to appraisers and their methods.
Today, the way the Santa Clarita real estate market is performing and the homes selling for these larger than listing price amounts is not coming from the appraisers approving those amounts. At least not all of them.
If you track back to 2007, the case was very different. The market was largely a subprime loan market with loan programs requiring zero down. The interest rates were not close to where they were today, but they were low enough to keep the home buyers seeing the advantage of owning real estate.
Much of the real estate in the Santa Clarita Valley is being sold above listing price with an appraisal report validating the listing price or a lower amount.
Today, the appraisers aren't to blame and there have been many arguments as to whether they were back in 2007.
In the current market, many homes are having offers written on them stating that the home buyer will pay the difference between their offering price and the appraised value. This "payment" has to come in the form of funds that are injected into escrow during the sale process.
So, as you can see, if an appraiser states the home is at fair market value, and if that fair market value is lower than the offering price of the buyer, in some cases (a majority of cases) the buyer has already agreed to buy the home at their offering price anyway.
Some of these "promises to pay" come via a suggestion from the real estate agent that is representing the home buyer. While this is not uncommon, I believe it to be a travesty to even mention before the buyer being "fully informed" of the consequences.
In other cases, the home buyers are dealing with a listing agent(seller's agent) who is writing something to this effect within the counteroffer that is being sent to one or all buyers.
Then, as a home buyer, you have a choice on whether to accept that counter or respond removing that requirement.
The jargon typically is stated in this say, "Buyer to pay their offering price, even if that amount is higher than the appraised value."
Are there other reasons why a home buyer can cancel a transaction, retain their deposit, and walk away from the transaction? Sure, if the other contingencies are in place and if they have not been removed as part of the negotiation.
However, it is really important for you to be careful and to have expert advice when embarking on your personal real estate journey.
I explain to my clients that ask if the home comes back at higher than the appraised value, is there some 'other' reason they can cancel and still retain their deposit.
I tell them of course, there is a multitude of reasons, but after you have had the home appraisal report surrendered, and after the seller knows the appraisal came in lower than your offering price, will they believe there was another reason you wanted to cancel?
And if they don't believe you, what can they do if you want to cancel after the appraisal comes back lower than you agreed to pay, and you cancel for another reason, wanting to offer a different contingency?
Good lawyer question and a good time to seek legal counsel.
However, the deposit you made on the home is in escrow, it has been deposited and is in the escrow's bank account.
For it to be released it has to be agreed to by all parties, even the seller.
What if the seller does not agree because they think you are actually canceling for the appraisal coming in lower than you agreed to pay?
Things can get held up. The seller's sale goes to pause. You're getting your deposit back is paused. Now the slow steps to working this out start. In some cases brokerages can work it out, in other cases, it has to go to the Board of Realtors, or seek legal routes.
No matter how you cut it, it's a mess and totally stress-inducing by all parties.
Hence, you really need to get good advice before you buy a home or sell one for that matter.
The current Santa Clarita real estate market, February 1, 2021, has a high volume of home buyers looking for anything that is classified as a Single Family Residence between the high 400's - which would be $485,000 and up to $850,000.00. Of course, the other factor that is keeping this market-moving within hours for every listing that is put up for sale is the fact our inventory has not been lower, ever!
When you are ready contact me directly at 661.400.1720 and I will take great care of you and yours. I'll be your realtor,