Every house for sale in today's real estate market must be sold twice. First, you must find a buyer ready, willing and able to purchase the home. Second, you must sell the value of that house to a bank so they will agree to lend money based on the negotiated price. The second sale may be more difficult than the first in the current lending environment.
A mortgage is necessary in the vast majority of real estate transactions in this country. The buyer puts a certain amount of money ‘down' and then borrows the remaining balance from a lending institution. The lending institution then issues a mortgage to the buyer using the house as collateral. In order to establish the value of the house (collateral), the bank will send out an appraiser. The appraiser will inspect the home; do research on the homes like it that have recently sold in the area and report back to the bank whatever it deems to be the value of the house. The bank must feel comfortable that the value is strong enough to justify using the home as collateral for the loan.
What does this mean to you?
If you are a buyer...
Realize that only you know what the true value of the home is to you and your family. You have probably shopped online and seen 100's of homes. You then picked out the ones you thought were best and visited them. You went into every room and saw every amenity. After scrutinizing all these homes, you picked out the one that best fit the needs and goals of your family. You agreed on what you believed to be a fair price. Don't allow the appraisal to convince you that you were wrong. The report was done in just a few days (or even hours) and was completed to satisfy the banks current need to be conservative.
Be willing to revisit the price of the home and see whether the difference can somehow be negotiated.
If you are the seller...
Realize you are selling your house at a time when banks are being conservative on values. If your appraisal does not come in, do not be quick to ‘kill the deal'. There is no guarantee that you will find another purchaser. There is no guarantee that a new buyer will match the offer the previous buyers made and, even if they do, there is no guarantee that you won't have the same challenge with a new appraisal.
Think hard and long and see if perhaps you can re-negotiate a deal that both you and the buyer can live with.
by Steve Harney on June 7, 2010
If you are looking for an Allen, Frisco, Plano, Celina or Prosper realtor - feel free to give me a call!
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