For sellers, probably the most nerve-wracking time is when their Windsor house is undergoing an inspection and appraisal. You just don’t know what the final reports will say. Sellers hope for the best, but expect the worse and greet the news with dread and worry.
Fortunately, in most cases, it’s much ado about nothing. However, it is important to prepare your home for its appraisal. This is a job performed by a licensed appraiser and they determine what the value is on your property. Banks require this before they will lend money, which seems fair. Why should they let a buyer take out a $200,000 mortgage for a home that is worth half that?
Here are some suggestions on how to get ready for the appraiser and what they look for:
1. Walk around the outside of your home and take notes on what repairs must be made. Carefully look over every angle of your property. Check the gutters, paint and landscaping among other things. Write down everything that needs to be completed, and that includes clean up.
2. Make sure the landscaping is tidy and the grass is mowed. Trim bushes and any tree limbs, particularly if they are rubbing against the home.
3. Grab that pen and paper and walk through the inside of your home and note any repairs that need to be made as well. Walk through every room in the house and view it like you are seeing the home for the first time.
Do the appliances work?
Are the floors in good shape?
How does the interior paint look?
Do the heating and cooling systems work?
Replace any broken fixtures or items.
Any leaky faucets or water dripping from the ceiling?
4. Clean the inside of your home and remove anything that resembles clutter. Patch any holes in the walls and touch up with paint. Prepare the inside of your home as if you are expecting guests.
5. Make a list of any home improvements you have made. This would include adding a new roof, painting, landscaping, remodel, flooring, heating, etc. All of these items add value to a home.
So let’s say you prepare and your home is ready to go. What happens when you and your buyer are shocked to find that the appraisal came in too low? First, take a deep breath. This doesn’t mean the end of the deal, it just means there are some options that need to be considered.
First, why would an appraisal come in low? You did everything right. The house was properly priced and all repairs have been made. What happened?
There are a few possible reasons:
1. The price was inflated due to multiple offers.
2. Market value of homes declined in the time your house sold.
3. Lots of foreclosures in the area.
4. Appraiser did not include relevant information or was simply wrong in his or her evaluation.
5. Appraiser was inexperienced.
Keep in mind that mistakes can be made. The first step is for the seller to carefully review the appraisal and ask the appraiser to correct any mistakes they made. If it was a mistake from the appraiser, then your problem is quickly solved. However, if this is not the case, then you have the following options:
1. Order a second appraisal. Sometimes this appraisal will come in higher than the first, especially if the first appraiser was inexperienced.
2. Buyer can pay difference in cash. Keep in mind that a mortgage company will still lend if the appraisal comes in low, but only for that appraised amount. Often in bidding wars, buyers really want the house in question, so they are willing to pay cash to make up the difference.
3. Seller can lower the price:
If a home was truly overpriced, then this is often the most logical solution. The buyer is happy and the lender is happy. True, sellers aren’t thrilled about the whole thing, but it’s often better than putting the home on the market again and starting the whole process over again.
4. Make a list of comparable sales.
This is where you would ask both agents to prepare a list of recent comparable sales that would justify your sales price. This is then turned into the underwriter and a review of the appraisal may take place.
If you and the buyer cannot come to terms, then the contract should be cancelled.