On Friday, I attended my last closing of 2008. I worked for the buyer, who happens to be a friend from church. She'd been thinking about buying for several years, but called me out of the blue just before Thanksgiving and said she was ready, pre-approved and even knew which house she wanted to purchase!
The property she chose is a circa 1920's duplex with high ceilings, soaring windows, around 1500 square feet and had been beautifully renovated about 5 years ago. Listed just under $130,000 and located in the older section of Martinsburg, WV, it had been on the market since early 2008.
The owners had relocated out of the area because of a job transfer, but they had left some furniture staged nicely. My friend fell in love with it!
I strongly encouraged her to look at similar properties, similarly priced, before she committed to making an offer. She did, but still wanted the duplex.
Having seen the competition, we thought we could probably offer less than asking price and also for some closing cost help. We did, the sellers accepted the offer, and so it began.
Unfortunately for the sellers, they purchased the property in 2004. Prices at that time were elevated, duh, and our sales price would leave them just over $30,000 short for their payoff. But they were on it! They'd already applied for a personal loan to cover the difference and were simply waiting for closing day to bring the check to settlement.
Now let me say that in this area, we routinely are still seeing re-sales listed at crazy too-high prices. I don't want to point the finger at anyone (Lord knows, I've had my own problems with sellers who simply won't believe what the comps are saying), but unrealistic sellers and agents who won't stick to their guns on asking prices are making this tough market even tougher. This property DID NOT fall into this category. It was priced well and had many lovely features and amenities. Both the buyer and I were surprised it hadn't sold already.
And I've heard the horror stories about appraisals coming in seriously under contract price: by tens of thousands, sometimes many tens of thousands. There are plenty of neighborhoods where the only sold comps are distressed sales...it is what it is. This property was not in one of those neighborhoods.
Neither the listing agent nor I thought we'd have a problem with this listing appraising at sales price.
How wrong can you be??? Ugh, pretty wrong...
$2900 was the difference between appraised value and sales price. That's right, less than three thousand dollars. Remember the sellers are already bringing over $30,000 to closing. My side of the commission was less than $2900. My friend, a single mom working for the federal government, who had worked hard to save her down payment, clean up glitches on her credit before even looking at houses or talking to her lender, was devastated. I can only imagine the conversation the listing agent had with his clients.
We searched and searched closed comps for something to give the appraiser. And I'm not knocking the appraiser. She apologized for being so close and yet so far away...she searched and searched as well. No better comps to be found.
Having properties listed for such a lengthy time means the comps you use to price a property correctly, fall out of the window the appraiser can use once you finally have a contract on the property. In this declining market, what do you do?
The sellers called their lienholder, explaining the situation and asking forgiveness for the shortfall. They said they'd be willing to do it, but the seller must submit a FULL SHORT SALE PACKAGE for consideration. OMG...for $2900???
Ultimately, the sellers found some money (likely tucked safely under their mattress), my friend found a little bit more money and the listing agent and I split the difference.
In retrospect, I'm so thankful that this transaction was between reasonable people who could see the forest through the tress. The sellers couldn't have been more gracious. Their agent is one I had not met before, but one with whom I hope to work many times in the future. My friend kept her eyes on the prize. She said on more than one occasion that this purchase wasn't an "investment" but was going to be her "home" for a long time.
Properties are selling, albeit for way less than what they sold just a few years ago. But when you do your job diligently by pricing your listings aggressively and they still don't appraise, what do you do?
In the early 2000's, when prices started their quick climb up, I remember saying, "I don't even know how to price properties anymore." There was nothing worse than getting a listing sold, only to find out that it appraised for significantly higher than sales price. Wrong again...this is worse.
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