Appraisal issues??? Nah C'mon that doesn't happen does it? If you ask any local Realtor, you will be met with an overwhelming.......YES! Right now we are in a full blown sellers market. There are not enough homes on the market. Not just in Macomb Twp but in all of Macomb, St Clair, and Oakland counties. A lack of supply and a huge demand means all kinds of craziness going on! Frequently buyers are willing to pay over appraised value. But that's not always the case. So what does this mean to the average seller or buyer? Let's look at a few scenarios.
First and foremost any agent worth his or her salt should be having this conversation with the seller prior to the listing hitting the market. The conversation should be like this. "Yes Mr. Seller I realize you think the property is worth 250K, but my question to you is what if the appraisal comes in at 240K?" After having that conversation, there should be a game plan in place if the situation does arise. Now in a scenario like this where there is a 10K difference it shouldn't be a huge ordeal. The options are the seller can drop their price to the appraised value or the buyer can pay the difference. Now if this is a standard FHA or Conventional Loan, then the buyer would have to pay the difference. So they would need their 3.5-5% down then add on the extra 10K. A lot of buyers are willing to do that but not all the time. Another option would be to meet in the middle. The seller will drop the price 5K, and the buyer would pay the other 5K. Sounds good, right? Well that's a perfect world. What happens when the appraisal comes in at 225K instead of the listing price of 250k? Let's explore that scenario.
So the home lists for 250K and a buyer who has an agent that doesn't do their homework(and check comparables before writing an offer) and we get the appraisal backs at 225K. Now what? Well the short answer is your up the creek without a paddle. The seller doesn't have to drop his price, and nobody in their right mind will be making up that difference. So now you have a buyer who wasted 2 weeks of his life. He paid $300 for a home inspection and another $450 or so for an appraisal. And now he has to go back and start all over. Imagine if this were a first time home buyer and money is tight. This could cause some serious problems.
There is something I would like you to keep in mind when it comes to over paying on a property. When appraisers look at comparables, they look at the last few months of closings. So lets say you buy a home for 185K and it appraises for 180K, and you decide to move forward. After this sale closes your home, becomes a new comparable helping out all your neighbors homes. You may have just added equity to someone who was right on the edge. And that's a good thing!
Whats the moral of the story? Make sure your agent does his homework. Make sure you do your homework as a buyer. You have to educate yourselves on the market, or you could make a few costly mistakes. If you are looking to Sell a home.......buy a home.......or invest in real estate contact me at www.christaylor.kwrealty.com I'd love to help. Until next time adios!
Chris Taylor
Keller Williams Macomb
586.524.1095
chris.taylor@kw.com
