Helpful Tips on Appraisals
You have sold your house for top dollar! Actually much higher than you had dared to hoped. Your buyer has plenty of money in the bank for the hefty 20% downpayment. You have nothing to worry about except to ponder how you are going to spend all that extra cash.
Actually, you do have something to worry about, and that would be the appraisal. You see the bank has told your buyer, we will lend them up to 80% of the total value of the property and the buyer has agreed to pay the remaining 20% with their downpayment. Now the value is not the offer amount, the value is the amount an appraiser determines it is worth.
The goods news during the past two and half years, during this up market, is that homes are selling above their list price. The bad news is they are selling above their list price but not always appraising for this amount. With the market raising so rapidly (25% in one year) the sold properties that appraisers draw on to determine price are lower than the offer amount.
Here is what can happen when an appraisal comes in low and what are ways to avoid issues if it does. Your selling agent may have addressed the issue during the countering phase and asked the buyer to make the purchase NOT contingent on the appraisal. Most buyers would wisely refuse to accept this counter, but they may decide they will pay a defined amount to cover the difference, usually $5,000 to $10,000.
Most offers are contingent on the appraisal, so when it comes in low, it is back to the negotiating table for seller and buyer. The seller has every right to cancel the contract because if they aren’t getting paid the amount on the contract, it is no longer valid. The buyers on the other hand can also cancel without any repercussions because the sale was contingent on a full price appraisal.
Most of the time there is a meeting of the minds and the everyone meets in the middle, but every situation, just like every house sale is different.
Helpful Tips on Getting Home to Appraise -
Use a competent Sales Agent that is willing to meet the appraiser with a complete report arguing the reason for the home’s high value. Your agent should make sure they list the benefits of the area, as well as the home.
Make sure you home shows as well as it did on its first Open House. I think this is where staging becomes a smart move on the sellers part. And of course, if it is staged, don’t remove it until after the escrow is firmly secure and the closing is just a week away.
Be realistic as to the value of your home. If the bidding war as taken your home to over-the-top pricing, be well aware the bank may not be as willing to throw caution to the wind.
Make sure the buyers have additional financing to draw on, should the appraisal fall short.
Michele K - Better Living in Long Beach!