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Thursday, September 08, 2011

Appraisals: The Final Hurdle to Buying Your New Home

You have been through all the steps to the home buying process.
  1. You got your mortgage pre-approval (not a pre-qualification).  
  2. You have looked at homes (actually only about six because your needs were clearly identified early).  
  3. You made an offer that was accepted by the seller (92% of list price). 
  4. You waited a few months (short sales take a long time). 
  5. The bank made a counteroffer which you accepted (95% of list price).
Now, one of the final hurdles – the appraisal.

An appraisal is ordered by your lender to get an estimate of the market value of the property you are buying with some of the banks money.

This very formal report will be provided to your lender to assist in their decision to issue a final loan approval.

I try to never second guess an appraiser because I know if your real estate agent has done his or her homework, then the appraisal should be at or even higher than the contracted price.

There have been occasions where I have heard of appraisers using distressed properties as comparables instead of fair market value sales which resulted in "an issue."

Appraisers are selecting the nearest, most recent sales of similar properties.  Appriasers are independent of the transaction - a neutral party.  I have also heard of situations where lenders choose an appriaser from 50 miles away who has no clue about the local market.

In some neighborhoods in Brevard County, Florida the only comparables may be distressed sales.   Sellers very often must price against the short sales if they really want to sell although it is known that distressed properties are discounted some from the fair market price.

And if the appraisal does not come in, what happens?    There are multiple options such as...
  1. The buyer always has the option of putting additional monies down.  
  2. The seller has the option of lowering the sales price a bit.  
  3. The buyer ups the down payment while seller lowers price a bit. [Sounds like "Let's Make a Deal!"] 
  4. The buyer can walk away. 
It is never a done deal until all the hurdles are crossed!

When you are ready to buy or sell a house in Brevard County, Florida, call me at 321-693-3850 or email me if I can help in any way.


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