Q – What if the home I’m selling does not appraise for the amount(less than asking) the buyer offered?
A – Then you have three choices. You can reduce your price to where the appraisal came in at.
A2 – You can see if the buyer will meet you somewhere, maybe in the middle, or elsewhere to make the deal.
A3 – You can cancel the deal if the buyer is not willing to come to where you are willing.
Tis the day of the appraiser. Back before the collapse of the last real estate market, late 2006-early 2007, appraisers were rarely questioned.
Maybe they were by “overzealous and pushy realtors”. For the most part, their appraisal stood as being the true and absolute value of the home which was being bought.
That meant that the loans which were being written went through without a hitch. It seemed that we had no issues with a homecoming in undervalued from where the offer was written.
It wasn’t until the market fell and properties started to lessen in value, that Paris, me and our team first observed homes and real estate not appraising for the listing or offering prices. At that point, we had been in the business almost 10 years. I started my real estate consultation business back in 1998.
A lot changed in the market after the fall. There were management companies/ overseers to the appraisers. There were changes to how realtors operated in real estate contracts mandated by the California Association of Realtors.
Today, it’s not unusual to have an appraisal report questioned by an entity within the lenders’ office. It’s not unusual to have an appraisal questioned by a Realtor or homeowner.
It’s surprising how often, now, this happens.
The concerns are usually pertaining to why the property did not appraise for the offering price? In some cases, there aren’t enough comparables to justify the desired price.
It could be that there aren’t enough comparables which are close enough in proximity to let the value come in.
In some cases, the homes are vastly different from one another, which disavows the comparison.
However, sometimes the appraiser makes a mistake. Sometimes, we need to counter the appraiser with additional documentation by way of comparables which he may have missed. (I’d know if he missed it by combing through his appraisal report)
It is not that uncommon for the appraiser to re-work the numbers if something is offered, which he is able to verify.
Sometimes sellers see that a single property closed which is indicating their home may sell for a higher amount. The fact is true that their home may sell for a higher amount due to additions and upgrades. However, this is going to be dependent on an appraisal being by the home buyers lender.
Most appraisers want three “good” comps. Close by, the same type of home, same year built, same bedrooms, same bathrooms, same profile, square footages to be close, lot sizes to be close, amongst other items in similarity.
A single home closing, in today’s market, may not be enough in the way of comparable closings to get to the amount needed. It may be able to be justified by an established trend. For example, if properties have been increasing in value for the past 2 years at 3% per month.
I have seen some incredible appraisal reports where my buyers were happy and sellers were sad, and vice versa.
The best thing you can do when hiring that “sales” agent is to have them go over this type of information so you are not hit by any surprises. We do this for our clients and it keeps everyone happy when things start to unravel.
Please let me know if you have any questions about today’s article where I spoke about some changes to the appraisal standards we have been seeing culminate since 2007.