I had a question thrown at me the other day. My client/customer refuses to adjust the price of their home because they must net X amount! Once we procure a purchase agreement, “how can I be certain it will close?” We can never predict an outcome of this nature, however with some thought and preparation, and informing the buyers that the appraisal may not match the contract price we have several options.
A) Presuming this is a CASH offer an appraisal is not necessary, however if I’m representing the buyers, I would certainly advise this. In a perfect world, I’ve seen this happen! Back before the Real Estate crash of 2008, lenders nor cash buyers cared! Mortgage brokers wanted the deal, buyers wanted the home for fear they would loose their chance of obtaining the home of their dreams. The buyers made offers on half a dozen homes and lost their bid, due to more than multiple offers in a transaction.
B) In today’s world, buyers have many choices. It’s my opinion buying a home that was or is a builder’s model, is a very bad idea. The buyer is obtaining a property that has exceptional features and that can be great, however when this homeowner attempts to sell, the challenge? Ninety percent of the time it will not appraise, you ask why? Living in a home with remarkable features is extremely satisfying, it’s extremely challenging to o get your equity out of the home. Appraisers are required to appraise, by location, and the bare bones of the property, nothing more.
C) Many appraisers lost their licenses in the late 2000 early 2010 evaluation due to pressure and practices that were not always the most professional. The state pounced on these carless individuals and legislation changed the requirements. The most stringent of this criteria, requiring a Bachelor’s degree and internship in order to obtain a license.
D) Appraisers can be overwhelmed with orders, and to streamline their business they hire or contract data collectors and at times have individuals perform drive by observations with photos. He or She examines the data and photos, thus determining the value and go to the next appraisal. An appraiser is not required to complete an analysis with any more detail. Missing content value, is actually something appraisers ethically cannot include in their value.
I will continue to share examples and go into detail defining the term diminishing return, all of which are factors in an appraisal. To be safe in any real estate transaction, keep in mind the bones and location are the subject matter, not detailed amenities offered in a model home, or a home with too many amenities to support the market value.