Saturday, December 29, 2012
- Financing delays, low appraisals, title problems, home inspections, and even buyer’s remorse can interfere with a seller’s ability to close a sale.
- The good news though is that many of these problems are preventable if sellers are proactive and involved.
- Sellers should seek out a buyer who has been preapproved for a mortgage. Typically, the buyer’s agent will be eager to share this information with the seller’s agent.
- Real estate agents report that low appraisals have prevented transactions in recent years, because appraisers – who are hired by the lenders to assess the value of the home – are overly conservative in their valuations, even though home prices are rising in many locations. To avoid appraisals problems, sellers should price their home in line with comparable homes for sale in the area.
- Some listing agents include a preliminary title report as part of their package, and a good agent will be able to spot red flags when reading that report for their client. Problems such as an unpaid sewage assessment, deed that was never recorded, or an easement that was granted which the owner is unaware of, should be addressed early on.
- Sellers also should encourage buyers to move quickly on things like the home inspection. If a deal is going to collapse, it is better to know sooner rather than later so the home can go back on the market.
As the real estate market heats up and prices continue to recover, more home buyers and sellers are likely to encounter the problem of an appraisal that is lower than the agreed-upon sale price.
Making sense of the story
Appraisals must be based on recently settled transactions, and in a rising market those past transactions are likely to be lower in price. Whether a buyer or seller, it’s important to understand the risks involved around low appraisals – and the options available.
Because of new restrictions on the relationship between lenders and appraiser – aimed at curbing the appraisal abuse that contributed to the housing bubble – buyers and their mortgage representatives have less control over the process. Lenders simply order an appraisal from a list of approved appraisal companies, and a third party directs the individual to perform the appraisal.
Resulting from the third-party rules, the appraiser who is assigning a value to the home may not be from the immediate area. It can help to inform the appraiser of the quality of the school district or the amenities in the local neighborhood, as well as improvements to the property as compared with other recent sales in the area.
One appraiser recommends sellers prepare a package of information on the home, including data on comparable houses and any improvements that have been made that should influence the value of the home.