While there are many challenges, in terms of selling a home effectively, it must be recognized that most potential buyers can only afford to buy a home by taking advantage of a mortgage purchase. We often discuss the need to ensure that a potential buyer has a quality credit rating, in order to qualify, as well as demonstrate, a responsible approach to looking after their personal finances and obligations. However, a potential hurdle, which is often overlooked, is whether the property in question will be priced at a high enough price that a lender will often get the most favorable loan. Unfortunately (but the reality is), the evaluation process and procedure is far from perfect, it contains flaws, sometimes creating undesirable challenges and / or obstacles. This article will briefly examine 5 of these possibilities, which could have a negative impact on a potential transaction.
1. Price higher than what the market indicates: There are times when a buyer, either because they don’t know the market or because they love a particular home, offers much more than the market could dictate. When the credit institute evaluates the house, it shows a lower value and, therefore, the LTV, or the loan-to-value ratio, creates resistance to getting the best terms, or even the loan, at all. A prepared buyer understands this, and if he still wants the house, he should pay a lot more so that it doesn’t become a negative factor.
two. Wrong “comps”: There are times when an appraiser inappropriately undervalues a property in question, because he or she uses the wrong properties to compare the home and / or is not completely familiar with the local real estate market. Be careful if the valuation compares a colonial-style house, with Capes, etc. Take a close look at the characteristics of all properties, and either the buyer, and / or their real estate agent, should help guide the appraiser to the most appropriate houses.
3. The appraiser does not know the local market: Every real estate market has certain specific characteristics and, in some cases, there may be several micro-markets, even within a local area. If the appraiser is unfamiliar, you can compare a home in a more desirable market to one in a less valuable one. Remember the edict Rent, rent, rent!
Four. Mistakes: Please check carefully, to discover and learn, if there are any errors, involved, in the description of the characteristics, etc., of the starting topic (yours). Typical areas to check, include, described conditions (windows, doors, HVAC, bathrooms, kitchens, patio, deck, etc.). Has the appraiser subtracted when he should have added, etc.? Remember, if you think there is an error, you have the right to dispute it!
5. Inaccuracies: Is the batch size indicated correctly? Only the mentioned size, even if one batch, is fully usable, when another is not? Have any of the competitive (“Comps”) properties, overlooked the status of another home, and its impact, etc.
While the appraisal process is important and essential, potential home buyers should be careful – they are not necessarily accurate or complete. You or your agent must dispute any inaccuracies!