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If you are representing a seller, and someone wants to buy their home, the buyer will need an appraisal to get their loan. Much of the time they will also want to have an inspection on the property as a contingency. The inspection usually comes before the bank gets around to ordering an appraisal. Most inspections cost the buyer $500 to $550. They usually pay before the inspection, or at the time of the inspection without the guarantee of the loan going through.
Now somewhere further down the purchasing cycle, the bank that the buyer decides to use orders an appraisal. With the new appraisal rules that became law recently the appraiser is from a pool of appraisers. They may live more than 200 miles from the property. They may never see the property. There are no rules about this. They may use something like Zillow to do the appraisal on the property. If the appraisal comes in low for various reasons, your buyer may not be able to secure the loan to buy at the price agreed upon. You will now need to negotiate a new price. That is if the buyer wants to negotiate a new price.
Generally the bank will loan on the ratios they have agreed upon, but now on the current appraised price and not the contract price between the seller and the buyer. You and the seller are now in a very bad predicament. The buyer can ask for a new appraisal, but the new one may not be better than the last, and many banks will take the two and average them. The buyer also has a problem. He has paid to have an inspection on a property that he may not wish to buy.
Is there an easy solution to this scenario? No. Top attorneys say that this real estate law procedure is not going away. Appraisals are going to be at a distance from the lenders and agents. What sellers need to do is have their home priced as close they can to current comparable properties if they want to see a sale go through.
Special amenities of listed homes will not carry as much weight has they have in the past. Short sales and foreclosures will be included in the comparables used by appraisers.
Things will get tougher before they will get easier. We need to be sure our sellers are aware of what the appraisers are going to use for comparables. The information is available, and may make the difference between sale and no sale.
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