While there are many challenges, in terms of effectively selling a house, it must be recognized, most potential buyers, are only able to afford, buying a home, by taking advantage of acquiring a mortgage! We often discuss the need to insure, a potential buyer, possesses a quality credit rating, in order to qualify, as well as have proven, a responsible approach to taking care, of his personal finances, and obligations. However, one potential, stumbling block, which is often overlooked, is whether the subject property, will be assessed, for a high – sufficient, price, so a lending institution, will often the most favorable loan! Unfortunately (but the reality is), the appraisal process and procedure, is far from perfect, containing flaws, which sometimes creates, undesirable challenges and / or obstacles! This article will briefly examine 5 of these possibilities, which may negatively affect impact, a potential transaction.
1. Price higher than what the market, indicates: There are times, when a buyer, either because he does not know the marketplace, or loves a particular home, offers considerably more than what the market, might dictate. When the lending institute evaluates the house, it shows a lower value, and then, the LTV , or loan – to – value, ratio, creates resistance to obtaining the best terms, or, even, the loan, at all. A prepared buyer understands this, and, if he stills wants the house, should put consider more down, so it does not become a negative factor!
2. Wrong “comps” : There are times, when an appraiser, improperly, under – values, a subject property, because he, either uses the wrong properties, to compare the home, to, and / or, is not fully familiar with the local real estate market. Beware if the assessment compares a Colonial style house, to Capes, etc. Look closely at the characteristics of all properties, and, either the buyer, and / or his real estate agent, should help, guide the assessor, to the most appropriate homes.
3. Appraiser does not know local market: Every real estate market has certain specific characteristics, and, in some cases, there may be several micro-markets, even within a local area. If the appraiser is not familiar, it may compare a house in a more desirable market, to one, in a less valuable one. Remember the edict, Location, location, location !
4. Errors: Check carefully, to discover and learn, if there are any errors, involved, in describing the features, etc, of the subject home (yours). Typical areas to check, include, conditions described (windows, doors, HVAC, bathrooms, kitchens, patio, deck, etc). Has the appraiser subtracted when he should have added, etc? Remember, if you believe there's an error, you have the right to contest it!
5. Inaccuracies: Is lot size, properly listed? Has only the size mentioned, even if one lot, is fully usable, when another is not? Have any of the competitive ( “Comps” ) properties, overlooked the condition of another home, and its impact, etc.
While the appraisal process is important and essential, potential homebuyers should beware, they are not necessarily accurate or complete. Either, you or your agent, should contest any inaccuracies!