Saturday, September 15, 2018

What To Do When the Real Estate Appraisal Comes in Low in Hendersonville, N.C.

      Mr. Seller's Realtor advises him to list his house for $275,000.  Mr. Seller insists on a $300,000 price.  After a long wait and several rejected offers, Mr. Seller finally gets a $295,000 offer.  He accepts it.

     He congratulates himself for hanging tough and getting the top price. Then the real estate appraiser from the bank shows up to appraise the house.  Mr. Seller points out to him that his rafters are made of 2x8 lumber.  Mr. Seller points out that the nails are extra heavy duty galvanized nails.  Mr. Seller points out several features that his house has that other "ordinary" houses do not have.

     A few days later the appraisal comes back at $269,000.  WHAT!   Is this appraiser crazy?   Mr. Seller showed him all the extras that his house has.  Didn't he see the electric garage door opener with the remote control?

      The first thing Mr. Seller needs to do is get mad.  He needs to call his Realtor and let him know how mad he is.  He needs to let his Realtor know that he knows that real estate appraiser is an idiot.  He needs to tell his Realtor that surely his house is worth $295,000.  The buyer is willing to pay that for it.

     Mr. Seller's first question is probably," Who picked that appraiser?" .  Unfortunately, the answer to that question will usually bring Mr. Seller no peace. Mr. Appraiser was chosen by the bank to protect the bank's interest.

     If Mr. Appraiser says  the house is worth $269,000, the bank is comfortable loaning Mr. Buyer $215,200 or 80% of the value of the house.  Mr. Buyer wants to borrow $236,000 or 80% of $295,000.  Mr. Buyer has scraped up every penny he can to get the $59,000 down payment  together.

     BUT Mr. Appraiser says that the house is only worth $269,000.  What does he know???   Mr. Seller believes that he knows more about property values in Hendersonville North Carolina  than Mr. Appraiser knows.  So what if Mr. Appraiser has been to appraisal school?  So what if Mr. Appraiser looks at more houses in a month than Mr. Seller has looked at in a lifetime?  So what if Mr. Appraiser has been appraising real estate  for 17 years?   So what if Mr. Appraiser has some fancy initials after his name?  So what if Mr. Appraiser is considered to be an expert real estate appraiser?  Who cares about all those credentials?

     After Mr. Seller gets over being mad, he can ask his Realtor for some advice. What can we do to save this transaction?

     We can ask the buyer to pay $295,000 for this house even though the expert real estate appraiser declares that it is only worth $269,000.

     There are two problems with this.  The first problem is that since the house is appraised for $269,000, the buyer has to have $79,800 for a down payment.  That is $295,000, the price, minus the $215,200 that the bank is willing to loan on this house that the bank knows is only worth $269,000.  The bank will loan 80% of the price or the appraisal whichever is lower.
Trying to sell your property for more than it is worth rarely works

     The other problem is that the buyer, not only has to come up with $20,000 more down payment.  The buyer has to sign a form that admits he is certified stupid.  The buyer has to sign a form acknowledging that he is aware that the house was appraised by an expect real estate appraiser for $269,000 but he is buying it for $295,000.  Who would do that?  Only a stupid person would do that. 

     If the seller and the Realtors are lucky, Mr. Buyer will do that IF HE IS ABLE.  He has to have the extra $20,000 to make this happen.  Mr. Buyer says, "I don't care what the experts say.  My wife loves this house and we are buying it."  Let's go to closing.  Sometimes it happens this way.

     More often, this deal dies.  Several months later Mr. Seller accepts a $269,000 offer from another buyer.  We go to closing.   Several months can be a long time if you are making payments on an empty house and paying taxes and HOA dues on an empty house and insuring an empty house and paying utility bills on an empty house. 

     If Mr. Seller's  Realtor advises Mr. Seller to lower the price  and if an expert appraiser that has already been paid advises Mr. Seller to lower the price and if several offerors (buyers) advise Mr. Seller to lower his price and his current buyer that obviously loves the  house but does not have an extra twenty grand advises Mr. Seller to lower the price, maaaaaaaaaaybe  Mr. Seller should start to believe what the entire market is telling him.  His house is not worth $300,000. 

     Price your house right.  It will sell.  Do not depend on "We might get lucky."  for the largest transaction of your life.  No matter how good your Realtor is, he is not good enough to sell your property for more than it is worth. 

    If I can help you with any real estate advise call me at 828 755 6996.

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