Before a lender will commit to a loan, it needs to make sure the property under contract is worth the purchase price specified in the offer to purchase. If the appraisal comes in under the contract price, then the lender will only issue a loan based on the appraised value, rather than the price that was specified in the offer.
In today's market it's not uncommon to see appraisals come in under the contract price, and when this happens it can potentially blow up the deal. That's why we will work proactively with an appraiser - on behalf of our listing clients - so the appraiser knows why the property was priced as it was, and why the contract price is a good reflection of the current market in the neighborhood.
In most situations the appraiser has never set foot in any of the homes that are used as comparable properties in the appraisal report. So we'll share our own assessment of the properties in the neighborhood - the upgrades, the quality, the intangibles. We'll let the appraiser know of any short sale or lender-owned properties that won't offer a good comparison. And we'll share our knowledge of area streets that are busier thoroughfares, which can lead to lower selling prices along those routes.
So far we've never had an appraisal come in low when we've taken the time to share with the appraiser our knowledge of the neighborhood. Our listing clients appreciate this. And the appraisers do, too. One appraiser recently thanked us for sharing what we knew of the neighborhood, saying the information we provided him would help him to produce a better appraisal.
Have a good day,
Dan Miller, Keller Williams Realty and www.DaneCountyMarket.com
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