July 2015

Several agents that I know have encountered appraisals that were so stunningly low, that the purchase contact fell off and died. This can be the number one death of a contract- not the price, not the closing date, not the people-the appraisals. That is why it is so important to price your home just right. So many times when I am speaking to people about selling their homes, they will let me know that “the house across the street sold for…..” or “ …last year, when my neighbor moved, she got….” Or my personal favorite; “I would like ___ dollars per square foot for my house”. The problem with all these common scenarios, besides the fact that the Sellers’ home may not have the same quality updates as these houses, is that appraisers are going to come in and may burst everybody’s bubble to safeguard the Buyers’ lender.*

To come up with the proper price, I do my due diligence and study the homes that are in the neighborhood and develop a Comparative Market Analysis (CMA) of your home, based on similar homes in the neighborhood within a distance. If you have a multi-level split home, with 4 bedrooms, 2.5 baths and a two car garage, I will look at house that have sold, are in contract, and still on the market that have the same amenities; so I will try to shun houses that are not like yours to get you the right price and avoid the disaster of a low appraisal.   Let me give you an example of what I mean from the Buyers’ side of the situation.

Suppose you are in the market to buy a house, you find it- your dream house, and they are asking $330,900. You really didn’t want to spend that much but you have had an eye on the house for years, you love the neighborhood, and you and your kids have friends that live around the corner. So you offer $310,000 and hold your breath…. Great news! They (begrudgingly) accept! You are in contract. Everyone is excited and relieved and thinking about packing. Your lender orders a licensed, professional appraisal to be done to ensure that the money they are lending you makes good financial sense. The appraisal report comes in and your dream house is worth, according to the appraiser ……..$270,000. The Sellers’ are not happy because they have already come down $21,000 to accept the offer, the Buyers’ aren’t happy because their lender will not lend more than the appraiser’s opinion. This could end in disaster unless the Sellers’ agree to come down even more. This whole thing would have been averted had they priced the house correctly.

*The appraiser will only compare, among other criteria, similar houses that sold within 6 months of the contract.

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