Importance of Appraisals
Posted: February 02, 2017 by Jake D'Acquisto
Happy Thursday folks, I know you've been dying to hear what's next on my work in progress. Hopefully you didn't lose too much sleep. This week I wanted to touch on Appraisals.
The importance from a sellers standpoint, the awareness of who's doing the appraisal and what exactly are they? An appraisal is a professional opinion on the value of something tangible. In this case, a home. They can be done using a few different approaches most commonly using a sales comparison
vs a cost to reproduce approach
. In Duplexes and Multi families an income approach would be considered as well. If you're buying
a home and you're getting a loan a lender will require an appraisal to make sure appropriate collateral supports the amount borrowed.
In our current market agents, buyers and sellers alike are seeing discrepancies. Due to a strong sellers market
(low inventory, great mortgage rates) consumers are offering above asking price to ensure their offers are accepted. Great news for Mr/Mrs. Seller! Then.....comes the appraisal, it came back $10 thousand difference. Lender will only loan up to the amount appraised. WHO'S
going to cover this? Most cases seller will say "if they want the house bad enough they'll come up with the variance." In reality buyer may very well not be able to pay this out of pocket. Maybe they split 50/50 or they agree to some other type of split. That's all conditional. It's important to note many buyers even if they're paying cash will check that appraisal box in the offer to purchase as a form of leveraging their offer. Which leads me to the subject of this wordy write up. I encourage my sellers to get an appraisal before going to market for a couple reasons: 1.)
Hire a professional who's seasoned in the area
of the subject home
A great document to have on file for justifying your price to frugal buyers. 3.)
There's no shock when us agents give a price opinion that's below Mr/Mrs. Sellers view . 4.)
Great for rebuttal if a buyers lender hires an appraiser who's unfamiliar with the area who's strictly going off square footage, acreage and past sales. Factors to consider if Appraisal is low
:IF the subject home is on the lake, did they consider not only the amount of frontage but what kind? Level? Soft bottom? Swimmable? An appraiser not familiar with the lake could very well miss this aspect. What kind of exterior does the subject have? If it's brick that needs to be considered. If it's cedar shake and on the verge of rotting that should be considered as well. In real estate and everything else in life we cannot assume things will be done correctly by a "licensed professional." A great agent will go to bat and make sure all these aspects are taken into consideration. What can I do If the appraisal comes back low? Put your concerns on paper and submit to the lender, also you can supply this to the state appraisers regulatory agency for review. If you opted out of getting an appraisal before you may hire someone locally to do a separate appraisal for consideration. I like to be proactive
instead of reactive, that's why I advise on biting the bullet and getting your own appraisal done beforehand. That's all for this week, if you're still here tune into next week. Next week buyer inventory issues will be discussed. Looking to buy, sell or suggestions for appraisers? Email Jake@cb-elite.com.