Don't Wait for Low Appraisal to Kill The Deal

By
Real Estate Agent with EAS Inc

Why are you waiting for the appraisal to come back?

I am an appraiser, I know this process.

Before we even call you to set an appointment at the site, we have already looked at the MLS of the subject, and our software has automatically pulled nearby sales comps. If the home you are selling is in the mid-level of area prices, you might be okay.  However, if it is nicer than average, more upgrades, better views, or other elements, my comps are not going to help your deal, and they may kill it.  

My first batch of comps is strictly by price per square foot.  Unless you share your research with me, I am intending to bring it in, right in the middle of your market values.  Before I come to inspect, I have spent a few hours looking at sales and actives, and will likely not even look at the comps you hand to me. I have already made up my mind.

The banks have no interest in fighting to save the deal.  They just want a safe conservative valuation, and have handed this responsibility off to the AMC, back in Minnesota. The average time it takes to challenge a low appraisal is about 6-8 weeks. Can you afford to wait that long?

In today’s market, one has to be pro-active, thinking ahead of the process. How can we get the right comparables into the appraiser’s hands before he pulls the easiest, closest ones, those weak sales that do not support your sale?

Check out five steps that you can do, to increase your closing rate, that last 10-16% percentage.

1.   Interview the appraiser on the phone. If he is unqualified, or from too far away, do not let him in the house. Would you let an unqualified plumber come in to do repairs?

2.   As soon as the contract is signed, go back to your desk and develop two things:

     a.    A word.doc list of 10 or more features that add value to the property. Be specific.

     b.    A print out, as.pdf, of the full listings of 4-6 best sales and 3-4 best active listings.

     c.    After you have qualified and accepted the appraiser, send him your two lists right away.    

3.   When you meet the appraiser at the site, (and you do want to meet him there, even if you are the buying broker) walk him through the home and point out all the features on the list. In addition, describe for him, again, the comps and recent sales you used to develop the listing price.

4.   As soon as the appraiser has left the site, start preparing "PLAN B". Work both sides for small contingency measures, in case the appraisal comes back low. Explain that the appraisal process is different now, used as more like an insurance policy, than an actual reflection of the true market value. Explain also, that the AMC will typically send out the lowest-fee appraiser, even if he is new or from outside the area.

5.   If the appraisal comes back low, immediately implement "PLAN B". This saves the deal, allows the buyer to be happy with their new home, the seller to be happy with their new move, and the agents to be happy with their commissions.  Not to mention Home Depot is happy to sell more paint, the neighbor kids are happy to have a new playmate, and the daughter is happy to finally have a room of her own, freshly painted pink.         

For more information, be sure to check out our website at www.eas2.org/blog

 

Comments (2)

Kym Wright
Prudential California Realty - Olivenhain, CA

James,

You rock!  This is awesome.  Thank you so much, I have put your steps into my Active Rain best practices/tips folder.  Thank you!!

Sep 13, 2011 07:02 AM
Jennifer Chiongbian
Specializing in all types of Manhattan apts & townhouses - Manhattan, NY
Real Estate Broker - NYC

The appraisal can definitely stop things dead in its track if one doesn't know how to prepare for a possible low value.  This is why I too, decided to get my assistant appraisal license for NY State.  I didn't want to be in a helpless position if the vlauation came in low.

Sep 13, 2011 08:03 AM