Carlsbad Homes appraisal comes in below your sales price, now what?

By
Real Estate Agent with HomeSmart Realty West BRE #01786169

Carlsbad housing market trends have been bolding  well for sellers this past year, but some may Carlsbad Homes For Saleencounter hurdles even after you land a buyer.

Rising home values and a lack of inventory could set you up to receive competing offers, but that dynamic could also increase the likelihood that the appraised value of your home could fall short of the agreed upon sale price, potentially killing your deal.

Since banks rely on appraisals to determine the size of a mortgage being sought by a homebuyer, the justified market value of your Carlsbad home must reach the amount after down payment. After the fiasco of lending ridiculous amounts of money to people that didn't qualify and assuming homes would raise in value at equally ridiculous rates, banks are much more cautious when hiring appraiser, they would rather have an appraiser that comes to your Carlsbad home in a lower value not worrying about what it may be in 6 month's. Lenders do this to ensure that they will be able to recover their funds in the event they have to sell the home should the borrower default on the mortgage.

When an appraisal comes in below the agreed upon price, a buyer may not be able to borrow the amount needed to buy your home. At that point, the buyer usually has to make up the difference with a larger down payment or walk away. Most buyers do not have the extra $$$ for the downpayment so walking away tends to be the option mostly used.

This scenario was widespread in 2010, as foreclosures swelled following the housing bust, resulting in a surge in homes being valued by appraisers below what some buyers were willing to pay.

The same may be happening again, but for very different reasons.

Here are some tips on what home sellers can do if their appraisal disappoints:

Be proactive

To determine the market value of a home, an appraiser compares prices of comparable homes recently sold in the area. Then they take an apples-to-apples approach, excluding or making adjustments for certain features, such as a swimming pool or finished basement.

One way to make it less likely that the appraiser will miss something is for the homeowner to provide details on any improvements made to the home, said Lance Coyle, president of the Appraisal Institute, a professional association.

Homeowners can also ask to accompany the appraiser during the inspection, although they should run that by the lender first, as the appraisal is done on behalf of the bank.

Carlsbad Homes for SaleTalk to the buyer

Homeowners can appeal an appraisal, but before taking steps to do that they should find out if the buyer is willing to pay the higher price.

Buyers who agree to pay the contract price will be willing to help make the case to their lender in favor of considering an appraisal appeal.

Review the appraisal

Ask for a copy of the appraisal report. Federal law requires lenders provide the appraisal upon request within 30 days.

Look for potential factors that the appraiser may have missed when comparing the property to similarly priced homes that sold recently. Does the house require major remodeling, or is the number of bedrooms and baths comparable? Did the appraiser make adjustments for the lot sizes of the homes?

Make your case

Most lenders have appraisal appeal procedures, known as reconsideration of value.

With the buyer's permission, contact the lender and show them any discrepancies or information that the appraiser didn't consider in the assessment.

One option is to ask the lender to order a second appraisal for comparison purposes. If the lender agrees, that can run from about $200 and up, depending on the home. And there's no guarantee the new appraisal will turn out any different.

Ultimately, the original appraiser will determine whether any information submitted in the appeal merits a change to the initial appraisal.

Negotiate

If the original appraisal stands following an appeal, the process is over.

At this point the sale will likely fall through, unless the buyer can kick in a bigger down payment to cover the difference between the loan and the contract price.

Still, in markets where the inventory of homes for sale is particularly tight, there will be more pressure on the buyer to make up the difference in the appraised value versus the contract price, particularly if it's only a few thousand dollars.

 Are you Selling or buying a home in or near Carlsbad?

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Rob Denny

"Dream Home Specialist"
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