Harleysville-Lansdale Real Estate and More

If I have a buyer willing to pay my price, why do I need to care about the appraisal?

     You need to care, because the bank loaning your buyer the money to purchase your home cares.  Due to the recent national downturn in the real estate market and increase in the number of foreclosures, real estate appraisals are having a major impact on the current market.  Some sellers in this market are losing thousands solely due to the appraised value of the home.

     When a buyer applies for a mortgage, the lender will order an appraisal to determine the value of the property to ensure that the loan is based on appropriate collateral.  The appraiser will inspect the property and review recent comparable sales within a certain radius.  The lender will then review the appraisal and accept or reject it.  If the appraised value of the home is less than the buyer has agreed to pay, the mortgage company may deny the full mortgage to that buyer, especially if the buyer is not putting down very much money toward the sale of the home.

     The problem in today's market is that some of the recent sales that appraisers are looking at are short sales and foreclosed properties.  These sales are driving down the appraised value of homes even further. 

     An additional factor is that the government has instituted regulations restricting the mortgage companies on selecting an appraiser.  This was done in an effort to prevent fraud.  The problem is that the mortgage companies can no longer talk directly to an appraiser when reviewing the appraisal.  Additionally, some appraisers are given jobs in areas in which they are not familiar.  This compromises the appraisal process even further.

     A home can sell for ANY price a buyer is willing to pay for it.  However, if that buyer wants to use the bank's money to pay for the home, the bank will protect itself and only lend money on the appraised value of the home.  Understandably, banks are being more cautious than ever.  If the appraisal falls short of the contract purchase price, it is up to the buyer or the seller to make up the difference; therefore, many of these transactions fall through.

     If you are thinking about selling, give us a call at (215) 513-1333. 

~Lisa

Contact Scott Loper, Associate Broker, Realtor®, RE/MAX Realty Group at 215-513-1333 for help buying or selling a home in Lansdale, Harleysville, Hatfield, Souderton, Skippack, Collegeville, North Wales and the surrounding areas of Montgomery County Pennsylvania. To Search for Homes For Sale in Montgomery County Click Here.

Appraisal Schmaisal - Who Cares About Appraisals? - Copyright © 2011, The Scott Loper Team, All rights reserved.

One of the toughest things we have faced in the current real estate market is the appraisal done by the mortgage company.  No one seems to mind if an appraised value comes in at or above the contract sales price; HOWEVER, it is a completely different story when the appraisal is lower.

So for example, if you have a contract sales price of $300,000 but the appraised value comes in at $290,000, there are four options (and three out of the four are not good for the seller):

1. Cancel the contract and lose the sale.
2. The seller can reduce the sales price by $10,000.
3. The buyer can agree to reduce the mortgage amount by $10,000 and bring an additional $10,000 to settlement; thereby paying more than the house is "worth."
4. The buyer and seller can "split" the difference - the sales price is reduced by $5,000 and the buyer brings $5,000 more in cash to settlement (or some combination thereof).

In almost all cases, the only time a buyer pays towards the difference is if there is a seller assist involved.  They will sometimes agree to reduce the seller assist.  So for this example, if the contract sales price is $300,000 with a $10,000 seller assist and the appraised value comes in at $290,000, the buyer may agree to reduce the seller assist by some amount.

So there are a few things the seller and the list agent can do if they are worried about the appraisal, it may not always work but it could be the difference between an appraised value of $300,000 or $295,000 versus $290,000.

We know appraisals are supposed to be objective but there is always a subjective element - appraisers are only human and they make the determination of value based on what they see when they look at a home and review the comparable sales.  So we suggest:

Sellers should treat the appraisal appointment like a showing (the most important one they will have).  Have the home in tip-top shape for the appraisal.  Just like with buyers, small details can subconsciously make a difference in an appraiser's mind.

As a general rule:  If you wouldn't want your buyers to see it a certain way, don't let the appraiser see it that way either.

As list agents, we personally will meet the appraiser at the property with the list of comparable sales we used to support the value of the home.  We will also bring along "negative" comps that we think the appraiser is likely to look on his/her own.  We provide our own written assessment why the appraiser should consider some comparable sales and discount others.

So good luck with the appraisal and don't shoot the messenger if your list agent calls with the bad news that the house did not appraise for value.  It is a tough market, banks are stricter than ever and scrutinizing the homes they have to loan on.  All a seller can control is the condition of the home when an appraiser looks at it (and choosing a good listing agent who will take the time to meet with appraisers doesn't hurt either).

~Lisa

Contact Scott Loper, Associate Broker, Realtor®, RE/MAX Realty Group at 215-513-1333 for help buying or selling a home in Lansdale, Harleysville, Hatfield, Souderton, Skippack, Collegeville, North Wales and the surrounding areas of Montgomery County Pennsylvania. To Search for Homes For Sale in Montgomery County Click Here.

Sellers Should Treat the Appraisal Like a Showing to a Potential Buyer Copyright © 2010, The Scott Loper Team, All rights reserved.