There is a lot of nervousness these days getting past the appraisal contingency, which is one of several things that a real estate contract usually hinges on when a purchaser requires a loan. The contracts typically most susceptible are those from FHA and VA buyers, as these buyers many times can, and do offer more than the listing price, and the appraiser tends to scrutinize the property much more. These loans require the least amount of down payment, with the VA requiring zero down. A higher priced offer, over the list price, excites a seller as they see dollar signs, while a savvy agent knows that it must first get through the appraisal hurdle, or else the deal falls apart, or the seller has to lower the purchase price to the appraised value. Many times an agent will meet the appraiser at the property in an attempt to educate, enlighten, or justify the contract price using comparative listings and sold properties, as well as showing and detailing improvements, etc. Some times this is helpful when done with tact, while other times it just annoys and ticks the appraiser off. I typically just want to make sure that the appraiser is local and familiar with the area. Homes that border neighborhoods and dividing lines can be tricky if the appraiser is unaware of these boundaries, which a map does not show.
I am currently listing a home and in contract with a VA purchaser. I felt that we priced the home fairly, in the sweet spot of the market. We ended up getting two offers within a few weeks and settled in on one that was about $3000 under asking price. All the inspections went well with no issues. The appraiser called to let me know that the value would be coming in below the contract price, but wanted to give me an opportunity (known as “The Tide Water Process” only for VA loans) to submit my own findings and comparative sales. I thought this was courteous, however, in our conversation he made it clear that he takes his job very seriously, and that he’s hardly ever wrong. I interpreted that as, “go ahead and knock yourself out, but I’m not changing the value.” I proceeded to send him the comps and a write-up as to the value of the home, including upgrades and details he may have missed. Also I asked the question, “What other house can the buyer purchase in this area for the same price that is similar, where they can keep their kids in the same school” (which I knew was one of the buyer’s objectives).
End result: The appraisal came in at the list price, $3000 over the contract price. Go figure. Seller is getting his money’s worth by hiring me.
Lesson learned: Never give up. Decent writing can go a long way.
Anyone else have experiences, good or bad with appraisers and appraisals?
Keith Klassen, Broker
Posted in Real Estate, The Sacramento Real Estate Market, Valuable Information
Tagged Adventures in Real Estate, advice, Appraisal, Buyer, buyers, California Real Estate, Curtis Park, Development, First time home buyer, Midtown, Real Estate, Real Estate market, Real Estate Trends, Realtor, Sacramento Real Estate
My kids (and adults alike) love these huge bubble makers – they are awesome! It seems like the public feels the same way about the real estate market. One investor, friend of mine, who has been in business since the early 70’s – yes, 1970’s) is very skeptical. He says, “Maybe it’s just the old guy in me talking [kind of sounds like my dad], but I’m sure if this appreciation in the market is real or manufactured?” He went on to say that with the government backing so many loans at 3.5% down, so many home buyers are instantly upside down in their home after they buy it, as it takes about 8-10% to sell it.” I’ve never really looked at it like that before. My response was, “but hardly any other buyers are able to even get an offer accepted, let alone close on a home, due to all the investors gobbling up the inventory with cash!” My seasoned friend mused on, “Even with unemployment going down, I wonder how many of these new jobs are substantial… solid jobs – ones where people are making a good living and able to buy or invest with confidence.” I left that conversation thinking: 1) The market will keep going up as long as there is demand, and I know with my list of buyers, there is HUGE demand. And, it will keep going up as long as there is a perception of health in our economy – that seems what everyone wants to feel, even if it’s just a perceived reality. How long will it last? Or, at what price are these home unattractive to both investors and buyers? 2) Especially for investing… proceed with caution. Another friend at the table said that he will only invest if he knows that he can get out safely within 6 months. It’s interesting to hear seasoned investors say they are unsure and don’t know, especially when the wisdom of the day is to make certain proclamations like, “We got 2 years of appreciation!” or “Once the unemployment rate falls to ____, then interest rates will go up.” Some of these statements have truth embedded, but beware of those who “knows for sure.”
Another respected voice, Jed Kolko (Cheif Economist) says in a recent article, “that the next housing bubble is probably just a matter of time. But, as Trulia’s Bubble Watch shows, that time is not now.” See this interesting article HERE.
I caught a news piece this morning while at the gym. The title was something like the one above. The segment dealt with the question, Do energy efficient upgrades in a home make a difference in the sale price? Even with long-term energy savings, the short and resounding answer was, “NO.” While it makes all the difference for the environment, the sale prices do not reflect the upgrades, whether it be solar, added insulation, dual flush toilets, Energy Star appliances, etc. The target then got pinned on appraisers. They bluntly said that it was the appraisers fault… [paraphrased] The appraisers are behind the curve on this one. It’s the appraisers that have not gotten up to speed and are not giving correct value to these items. When an appraiser sees a furnace, whether it’s energy efficient or not, they just see a furnace…”
Now I have friends that are appraisers that will read this and have an acid reflex response (a little sour taste in their mouth). And I know theses appraisers do know the difference and can spot energy efficient systems.
I would love a response/rebuttal from the appraisal world. Sound off.
And don’t kill/hate the messenger – I’m just reiterating what I saw on the news this morning.
Keith Klassen – Real Estate Broker
Posted in Real Estate
Tagged Adventures in Real Estate, Appraisal, Buyer, California Real Estate, energy efficient, First time home buyer, Green, news, Real Estate, Real Estate market, Real Estate Trends, Realtor