Cars, jewelry, art and antiques...just to name a few, are items that can be appraised. The purpose of an a appraisal is to advise you of the value of an item. The need for this information is to protect the consumer from overpaying for product(s). In real estate, the dynamics of an appraisal are a little different from those commodities, just mentioned. It can be important, both in the hopes of under-paying (this allows you to walk into a nice chunk of equity); as well as, being assured you are not purchasing too high, in the surrounding market.
Car, dog or thimble...value still has to happen
If your unfamiliar with process of a home appraisal; let me take a minute to help school you.
So, you buy the home of your dreams (okay, the starter home you'd consider); and, you are willing to pay almost any amount of money for it. It's the perfect location, the best schools, close to amazing restaurants, and hip coffee shops...whatever your thing is. You've been looking forever, or maybe you just started; and, the housing market is smokin' hot (again, for sellers)! You've been instructed, if you find a place you love; it needs to be snatched up! Positive that you have found "the one", you make an offer; they accept. Cool. Schedule inspections, order title work and an appraisal. Awesome, inspections are clear, title commitment in; Aaaannnd...the appraisal, doesn't appraise. Huh? Now what?
Or, maybe your a homeowner who is trying to cash in on this seller's market, by way of frenzied multiple offers being tossed your direction. Here's the problem with your potential pay dirt sales contract; unless your buyer has the ability to whip out his Black American Express Card to pay over the asking price; then, you can count on the average buyer digging really really...really deep into those non-designer jeans for that cash. Anything over what the appraiser says is value, is the buyer's debit, most the time. No deniro...no deal.
What happens if I can't collect $200 at GO?
In either case, you can clearly see from these examples, the effect of an appraisal; and the critical need to have an accurate one. Nonetheless, this brings me back to the question; what happens if the appraisal comes in too low? How is this deficit fixed, provided the buyer isn't either willing to, or able to pay the difference between the value of the property and the sale price?
Here are a few options:
1. Have a bomb diggity, Realtor that is on top of that low appraisal report. Basically, your agent should be calling other sales professionals, who have listed properties in the area, and that are now pending for stats. Appraisers are not able to use homes that have not yet closed, as a valid source for comparables. Therefore, your Realtor needs to do their research, to obtain exact closing dates, and sold figures in order for the appraiser to consider a review. Also, looking into the county accessor records for the subject property, and neighborhood sales is another solid way to build value. Your Realtor can then forward this information to the lender, who can share it with the appraiser; and in most cases you can get that value raised. Thus, eliminating the problem.
2. "Can't we all just get along"? Everybody agrees to a little movement. In the most simple terms; seller comes down in sales price, and the buyer comes up in equal amounts. If you have a home that is in contract for $300,000, and the value came in at $285,000...then seller comes down $7,500 and buyer comes up $7,500 (without liquid assets or cold hard stacks; it would need to be built into an increased approval amount). The bridge has been gaped and the deal is still strong.
3. Seller won't budge, buyer won't budge; now, purchase contract won't budge. Deal...dead.
Got Boardwalk Place? Don't get greedy
You may be the Monopoly King, and, every Thanksgiving for the last 20 years, you've beat everyone in your family at the game; but, in the real world of buying and selling, Boardwalk Place cannot be sold 10 times more than it's value. Unless you plan on passing GO a few dozen times to pay that ten fold difference; your best strategy will be ask a fair price, and getting an equitable deal.
Reason has always existed, but not always in a reasonable form.
No comments:
Post a Comment