Wednesday, July 8, 2009
The Offer Giveth; the Appraisal Taketh Away!
Dear Sue
My Realtor has done a great job diligently marketing our home for the last two and a half months. We received an acceptable offer a couple of weeks ago. We were ecstatic!
Unfortunately, a ridiculously low appraisal was just turned in to the lender. I couldn’t believe it when I discovered that my house appraised $30,000 below the offer price!
I am in a total state of shock! I remember reading in one of your articles that market value is the price that buyers offer and that sellers accept. What the hey is going on?
What do I do now?
Shocked Sam
Dear Sam
As if there wasn’t enough confusion and fear in our crazy mixed up world of real estate, the new appraisal guidelines have created a level of uncertainty never before seen in our industry.
Writer Kenneth Harvey of the Washington Post Writers Group, refers to the new appraisal guidelines created to protect the consumer as “by far the hottest controversy in real estate this summer, and the process could directly affect the value of your house—probably negatively-- by tens of thousands of dollars.”
The spotlight is becoming focused on low- ball valuations and the new rules guiding appraisers.
Typical of the problem is your current situation. The appraisers, under the new system, are unfamiliar with the local market, inexperienced, or both, and are using distressed sales as comparables. Many of the distressed properties that are used as comparisons are in poor condition, and in some cases lack appliances, doors, plumbing and lighting fixtures. Some of the so-called comparables are even located in totally different, less desirable areas.
The director of the Federal Finance Agency declared that they are monitoring the situation and considers the view of all market participants important.
Until the new rules are modified, my advice to you is to negotiate. My experience has been that if you have a willing buyer and a willing seller you will ultimately come to terms that are beneficial to both buyer and seller.
First, ask the buyer if he/she is willing to honor the accepted purchase price. The buyer will often times agree to close the sale as negotiated, especially if he/she just had a similar experience in selling their own property.
Some buyers may be nervous about going ahead with the sale. In this case, splitting the difference is a commonly acceptable and agreeable solution. In other words, since the appraisal is $30,000 below the offer price, the buyer agrees to come up $15,000 and the seller agrees to come down $15,000. This solution is usually considered a win-win.
Contesting the appraisal, while usually a last resort, is a viable option. Ask your real estate agent to gather comparable sales that support the offer price and submit them to your lender. If the appraiser won’t budge, I would ask for a second appraisal. If it comes to ordering another appraisal, I would suggest that the buyer be in agreement and you had better be prepared to pay for it. There is no argument that paying an extra $3-500.00 for an appraisal is definitely worth adding an extra $30,000.00 to one’s appraised value.
I find that the risk of a lower appraisal can be minimized by meeting the appraiser upon his/her initial visit to the property and being armed with comparable sales.
Being ready to negotiate is a matter of good home $$’s and Sense!
Please visit www.seehometown.com for listings, to access MLS, to find an agent and to get information about Auburn, California and Placer County.
My Realtor has done a great job diligently marketing our home for the last two and a half months. We received an acceptable offer a couple of weeks ago. We were ecstatic!
Unfortunately, a ridiculously low appraisal was just turned in to the lender. I couldn’t believe it when I discovered that my house appraised $30,000 below the offer price!
I am in a total state of shock! I remember reading in one of your articles that market value is the price that buyers offer and that sellers accept. What the hey is going on?
What do I do now?
Shocked Sam
Dear Sam
As if there wasn’t enough confusion and fear in our crazy mixed up world of real estate, the new appraisal guidelines have created a level of uncertainty never before seen in our industry.
Writer Kenneth Harvey of the Washington Post Writers Group, refers to the new appraisal guidelines created to protect the consumer as “by far the hottest controversy in real estate this summer, and the process could directly affect the value of your house—probably negatively-- by tens of thousands of dollars.”
The spotlight is becoming focused on low- ball valuations and the new rules guiding appraisers.
Typical of the problem is your current situation. The appraisers, under the new system, are unfamiliar with the local market, inexperienced, or both, and are using distressed sales as comparables. Many of the distressed properties that are used as comparisons are in poor condition, and in some cases lack appliances, doors, plumbing and lighting fixtures. Some of the so-called comparables are even located in totally different, less desirable areas.
The director of the Federal Finance Agency declared that they are monitoring the situation and considers the view of all market participants important.
Until the new rules are modified, my advice to you is to negotiate. My experience has been that if you have a willing buyer and a willing seller you will ultimately come to terms that are beneficial to both buyer and seller.
First, ask the buyer if he/she is willing to honor the accepted purchase price. The buyer will often times agree to close the sale as negotiated, especially if he/she just had a similar experience in selling their own property.
Some buyers may be nervous about going ahead with the sale. In this case, splitting the difference is a commonly acceptable and agreeable solution. In other words, since the appraisal is $30,000 below the offer price, the buyer agrees to come up $15,000 and the seller agrees to come down $15,000. This solution is usually considered a win-win.
Contesting the appraisal, while usually a last resort, is a viable option. Ask your real estate agent to gather comparable sales that support the offer price and submit them to your lender. If the appraiser won’t budge, I would ask for a second appraisal. If it comes to ordering another appraisal, I would suggest that the buyer be in agreement and you had better be prepared to pay for it. There is no argument that paying an extra $3-500.00 for an appraisal is definitely worth adding an extra $30,000.00 to one’s appraised value.
I find that the risk of a lower appraisal can be minimized by meeting the appraiser upon his/her initial visit to the property and being armed with comparable sales.
Being ready to negotiate is a matter of good home $$’s and Sense!
Please visit www.seehometown.com for listings, to access MLS, to find an agent and to get information about Auburn, California and Placer County.
Labels: appraisal, appraiser, Auburn home values, low appraisal
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