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Did you sell your home below market and not even know it?

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Services for Real Estate Pros with Buildalegacygroup #01089189

When selling your home in California most real estate professionals rely on a property profile provided by a local title company which lists your property information taken from public records.  This is common practice.  In most cases the information from the city records provided in these reports is accurate, however in some instances it is not.  It's these instances that can come back to bite you in the pocketbook or worse yet place you in a courtroom.  Some of these cases are a direct result of differences in living area between the home and what is reported in public records   Some, not all agents rarely verify this information stating a "Don't ask, don't tell" mentality.  Here are a few reasons given to me from those that don't verify this information.

•·        "This is a tract area all the homes are the same"

•·        "We have a disclaimer that states" information deemed accurate, but not guaranteed"

•·        "The buyer should do their own due diligence when buying a home"

•·        "I've been doing this for years and have never had a problem before"

•·        "That is what E & O insurance is for"

Major lenders throughout the country do not rely on public records when lending on a home they rely on Appraisers to verify this information (Even in tract areas)  The trend however unfortunately for the public, is to try to rely more on automated valuation models to "speed up" the process and eliminate the additional costs associated with appraising property . 

Some agents however recognize the increasing potential liability and have seeked and partnered with Real Estate Appraiser' on their listings to verify that there is not any significant difference between what the city shows and what the Appraiser came up with.  If there is a small variation between the two measurements then it is not likely a cause for concern and the agent can have the piece of mind that they did their "Due diligence".  The floor plan can double as a marketing tool for the agent who uses virtual tours or similar on line marketing.

When appraising a home the difference in some cases between what the city shows and what an Appraiser measures could be significant. Let's say for this example that the home reflects less than what is truly there in terms of living area size...  A room addition that is not reflected and not readily apparent.  Based on city records the agent relied upon smaller homes to determine the asking price and eventual sale.  The seller could have sold the home for much more as a result of this footage variance.  The Appraisal in this instance will reflect that the home sold below market as the Appraiser will use homes similar in size to the home they measured which are larger. 

The buyer is thrilled to learn they got a deal (if they ask for a copy of the report) the lender is also happy because they have more equity as a result. Unfortunately for the seller they will never learn of this as they do not, nor can, get a copy of the Appraisal.  The cost to the Realtor could be thousands as their commission is based on the sales price.  One costly mistake like this could amount to far and above the cost of home measurements for years. The selling agent did not intend to undersell the property, but unknowingly did so.   

How often does this scenario play out throughout the country we will likely not know as most buyers think it was their negotiating skills that got them the great deal.  Lenders are not required to notify the seller that they sold under market. Appraisers report the property sold under market but are not required to notify the seller either.  As a seller it may be good idea to have a pre-listing Appraisal  completed or have an Appraiser measure prior to listing with a seasoned real estate pro, or ask your agent if part of their marketing package includes the verification of living area.  What you don't know, could cost you both?

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Comments (1)

Tim Wade
RE/MAX Realty Champions - Wolfeboro, NH

Great information.  Food for thought.

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May 30, 2007 12:20 AM