Untold Real Estate Stories: Buyer Appraisal Guarantee Gone Wrong!

By Gwen Daubenmeyer

Gwen Daubenmeyer is the founder of our team. She brings an unwavering commitment to her clients and a get-it-done attitude. Gwen is unapologetically competitive. Marketing and negotiation are her Olympic events; if she could medal, she would. While winning is her “what,” her clients are her “why.”

Is the highest offer always the best deal? As a seller, I know the excitement of receiving a good offer. But before you get carried away by your potential income, checking whether the buyer has the financial capability to pay comes first. I’ll share a personal experience with one listing I had before, which I think we can all learn from.

I had a gorgeous listing, a total Pottery Barn makeover in a popular neighborhood. With years of experience in real estate, we have the multiple-offer strategy down to a science, and we knew that our listing would get multiple offers for my clients on this property.

After running our strategy to the letter and having our marketing generate so many showings, we had about 10 viable non-contingent offers for what we had. Five of them were outstanding. We had offers of $8,000 over, $31,000 over, and $40,000 over. Then we had a sixth dream offer—hands down the winner. These are their terms:

• $50,000 over asking

• Completely waived inspection (which we don’t recommend)

• 45 days of occupancy rent-free after closing

But here’s the thing about over-asking offers: Assuming a mortgage contingency, the home’s appraised value must equal or exceed the offer amount. If the appraisal comes in lower than the offer amount, the lender has three options:

• The buyer must pay the entire difference in cash

• The seller has to reduce the price of the home to match the appraisal

• A combination of the two options above where the buyer can partially pay cash and have the seller reduce the price

In our case, the buyer wrote in his offer an appraisal guarantee of $50,000, which means he offered to cover with his own cash any difference between the appraisal and the offer amount up to $50,000, which is great.

The sellers and I are reviewing all the offers on our offer spreadsheet, and we like this one. It is a no-brainer. We were tired from the nonstop showings then and just wanted to move forward.

However, as tempting as it is to rely on the pre-approval letter to do a quick DocuSign call and get the home sold, as a good agent, I had to call the other agent and ask a few questions.

First, I thanked the agent and asked about the buyer’s motivation for our house. Then, I requested proof of funds from the buyer’s lender or the buyer’s bank, verifying that the buyer had sufficient funds to close the transaction.

The agent said the pre-approval letter confirmed the buyer’s funds were solid. I replied that since he was $50,000 over asking, I needed proof of funds for the down payment, closing costs, and an extra $50,000 for the appraisal.

Since the buyer included a $50,000 appraisal guarantee, the other agent told me he had never been asked for that kind of proof and found it invasive. I responded that I just needed proof of the additional $50,000 needed to cover the offer.

While I felt bad about my request, I needed to ensure this buyer could actually close. My questions are making my sellers a little nervous because they want the $50,000 over asking, too, but they understand why I was pushing for proof.

A few minutes later, the buyer’s lender called me to verify my request, explaining that the buyer wrote an offer of $50,000 over asking with a full guarantee. A couple of hours later, the agent called, revealing that the buyer didn’t have the $50,000 for the guarantee and didn’t even have an extra $10,000.

I called my clients to explain the situation. I told them that if I had believed the appraisal would come in $50,000 higher, I would have advised them to price it closer to that amount. They agreed to accept the second-place offer of $40,000 over asking, with only $25,000 guaranteed. In the end, the appraisal came in $23,000 short, but the buyer had the extra funds, and we closed.

While it wasn’t as good as the $50,000 offer, that one is legitimate.

What can we get from this experience?

I’ve learned that the highest offer isn’t always the best. What truly matters is the buyer’s ability to close on that offer. Many buyers write inflated offers without their agents verifying they have the necessary funds, so we can’t rely solely on pre-approval letters.

Buyers should realize they’re putting real money on the line and be prepared to back it up. Sellers with multiple offers aren’t obligated to reduce the sale price just because an appraisal comes in low, as the appraisal reflects the lender’s financing conditions. Market value is determined by what buyers are willing to pay, and agents should be diligent in verifying a buyer’s financial capability before encouraging over-asking offers.

This experience is why you need a competitive and trustworthy agent to advocate for you and guide you through all these micro-steps and nuances in your transactions.

So, if you have any questions or are looking for a great agent who works just like we do, we are very well-connected all over the country and will be happy to connect you with someone who does. Reach out to us at (248) 850-2575 or hey@theintegrityteam.com. You’re in good hands here.