NEW YORK – In a perfect world, we will all buy low and sell high. In some places, home prices have increased by 47% since the start of the 2020 pandemic, meaning many should definitely be able to sell high.
Unfortunately, not all appraisals have kept up with such fast-rising values. As a result, some homeowners have had to enter long and tedious legal battles to realize what should have been a basic fair market valuation. Although life’s not perfect, selling one’s home should easily command the current fair market value.
Thus, we all should be adamant that home sellers – BEFORE listing their homes for sale (or even refinancing) – understand what a fair appraisal encompasses.
Here are four insider tidbits real estate pros should arm homeowners/investors with to ensure maximum, fair market profitability from their real estate sales:
Investigate area comparables
Know sales comparables within the last quarter (6 months maximum). For most home sellers that are “informed neighbors” (I don’t call it being a nosey neighbor—we are simply informed), they already know which homes in the neighborhood sold recently and for how much. Truth be told, that’s usually part of the impetus for selling. Still, providing those comps is a “good agent 101” skill, so I know this needs no explanation since you are a real estate rockstar.
Check in with the lender
When considering a prospective homebuyer’s offer, review with the homeowner who the loan is through – if it is not a cash offer – and that lender’s policies regarding appraisal issues. This kind of customer service is the difference maker that sets a committed, trusted professional apart (you) from someone with simply a sales license.
Remember that under-appraisals (low appraisals) do happen at times. However, questions create options. The “O” in Fair Housing D.E.C.O.D.E.R. acronym means we real estate pros are “Options Brokers” – not from a stock trading standpoint but from an “asking the right questions” perspective.
“The first sign of an educated person is that she asks more questions than she delivers” –Johnnetta B. Cole, past president of Spelman College.
Thus, before committing to a specific homebuyer or refinancing, the homeowner/investor should know what their lender’s process is if your client disagrees with the value by asking, or uncovering on the lender’s site, the following questions:
If there are concerns with the appraised value, will the lender offer a complimentary reconsideration of value (which we informally call a second appraisal)? If not, the additional cost may be an impediment to the homebuyer proceeding.
Will that second appraisal be with a different appraiser (a fresh set of eyes) or can it only be with the same appraiser (who may not be amenable to new information)?
Will the buyer’s rate be locked during the reconsideration process (since a rate change may make the home unaffordable for that specific buyer, making this an offbeat comedy of errors that create tears instead of laughs)?
Based on the buyer’s loan type, does the appraisal value stay with the home? If so, for how long? For some loan types like a VA loan, for example, the appraisal value stays with the home for six months. Yeesh! If a particular lender does not have a robust policy in place to challenge an off valuation, then that’s a long time to be stuck with a problematic appraisal.
Guide homeowners toward help
If the homeowner is not happy with the above answers, or never heard back, but still wants to proceed with the prospective homebuyer’s offer – or re-fi – then be sure to have your local fair housing center on speed dial. There is also the Appraisal Complaint National Hotline (1-877-739-0096). Lock that number in because there is a limited time frame to file a complaint (one-year statute of limitations in many instances, yikes!).
Have a stable of reputable lenders ready to go
As a real estate professional, if you like extra credit and bonus points with your clients, create a list of the various lenders that serve your area with their policies for each of the questions above. Of course, have a disclaimer that the information was last updated on ____ date and that confirming all information is still accurate is the homeowner’s responsibility to verify as part of their due diligence period.
Humans – during all points of real estate transactions – can make mistakes, but the key is how robust of a policy is available to help correct and ensure appraisals are fair.
© 2024 National Association of Realtors® (NAR)
