How to Avoid
Appraisals can make or break real estate investment
deals. Right now investors and home buyers are
facing a sticky problem in some areas.
Skyrocketing home prices in hot areas are creating
a gap between the asking price on houses and the
appraised value of the property.
Why? Because appraisers base their valuations on
past sales. They look at what comparable homes have
sold for over the past few months. In areas where
home prices have been climbing from 5% to 43%
per MONTH appraisals often come in below the
contracted price.
This can kill a deal, because the new buyer will have
to make up the difference between the contracted price
and the appraised value. Lenders base the amount
they will loan on a percentage of the appraised value.
For example: A home has a current value of
$200,000 in a market that has appreciated 10% per month
over the last few months.
However, the comparable sales over the months indicate
to the appraiser that the home's value is just $180,000.
If the appraisal would come in at $200,000 a lender would
usually make a mortgage loan of 80% or $160,000. That
means the buyer would be required to make a $40,000 down
payment.
But look what happens now. The buyer has contracted to
buy the home for $200,000, but the appraisal comes in at
just $180,000. Now the mortgage loan will be just $144,000
and the buyer will need a $56,000 down payment.
That extra $16,000 is often enough to kill a deal.
What should you do as a property seller in that environment?
As an informed investor you should always schedule a home
appraisal during a period when you can be there to talk to the
appraiser. It's your responsibility to point out to the appraiser any
improvements, features or additions that add value to the property.
A skilled appraiser will usually notice anything that might increase
(or decrease) a property's value.... but it's your job to make sure he
or she doesn't miss anything. Be sure to explain that the home is
especially well located for commuters, or the school district shows
a marked improvement, or a modern new shopping center has
recently opened nearby.
Check with your Board of Realtors and get the latest price appreciation
figures for your area. In other words... sell the value of the property
to the appraiser in any way you can. The time you spend doing that
can payoff in thousands of extra dollar.
One more tip... in your sales agreement include a Mark Walters is an investor-entrepreneur predicting a coming wave of foreclosures. Learn his pre-foreclosure system here http://www.pre-foreclosure.biz
(Use this article only if you make this an active link. Thanks) Author: Mark Walters
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