Buyer dishonesty on the rise
December 9, 2009
We have an interesting tactic going on right now in certain areas that are experiencing multiple offers on homes. I’ve had a feeling that this tactic was actually taking place for some time, but I just heard a talk from RPM Appraisal Service’s Director of Appraisals, Gary Voyavich, which confirmed it:
Gary says that in multiple offer situations, buyers are bidding far higher than they believe the house will appraise, just to beat out the competition and lock the seller into escrow. Then, when the appraisal comes in low, the buyer demands that the price be renegotiated down to market value. Did this buyer ever have any intention of paying the price he wrote on his purchase contract? Not a chance. He was betting on the appraisal coming in low, and he knew that in order to put himself ahead of the 18 other offers, all he could do was to put in a high puchase price and hope the seller and the listing agent would bite out of greed or ignorance.
Besides being shady and dishonest, this method can be risky and a waste of time for everyone. According to our company attorney, Mark Strombotne, “the contract is designed to give an automatic cancellation right to the seller if the house doesn’t appraise for the purchase price.” Should the Seller or their agent catch a hint that this buyer was being dishonest and offering a bogus offer, they may just kick them out of contract and move on to another buyer who was more realistic in their approach. In the mean time, all the high bidder has done is to waste everyone’s time.
