I came across a Facebook post from an appraiser friend of mine about an article written in the Chicago Tribune titled Homebuyers who pay cash win deals as appraisals derail sale in tight Chicago market. The title is definitely eye catching especially to an appraiser in Chicago.
The article touches on a variety of things that I’d like to respond to such as the reference to the shortage of appraisers. I don’t quite understand how a perceived shortage of appraisers is contributing to the main problem which is “the appraisers aren’t keeping up with rising prices”. I wonder what quote we might receive from Mr. Gregory if market prices were declining. That being said tangent finished and back to the point.
Mr. Gregory and all real estate agents that have had similar experiences have a legitimate problem that they must deal with. What can you do in that situation? There are a number of things you can do and are noted in the article. You can employ his strategy which is to offer to make up any shortfall in the appraisal with cash from the buyer to pay the seller, go with a new lender, appeal the appraisal which hardly ever works unless there factual errors as suggested by Mr. Goldberg or might I suggest an ounce of prevention is worth a pound of cure as quoted by…
You see all these potential ways to deal with this problem happen after the home appraisal is completed. What are realtors doing beforehand? I wrote a blog post titled 4 things you should tell the home appraiser when selling that was meant to be a conversation starter however that has evolved since I wrote it.
How often do realtors attend home appraisals? The majority of the time they do not attend, why is that?
You see realtors have information the paints the picture of current market conditions. If the realtor is not there we can’t ask questions like how was the listing price developed? Did the seller set the listing price? Was it based on some kind of weird math, is there an emotional attachment factored into the price, did they look it up on Zillow (ugh)?
Was the appraisal based on a realtor’s cma or area sales and listings? I can’t tell you how I often I have heard this; however, I hardly ever receive the cma or the “area sales and listings”. If this is how the list price was determined, as the realtor do you have this information readily available to present to the appraiser? Now I know what you might be thinking, appraisers don’t accept this kind of information in fear of being influenced. Let me clear up a misconception, you can provide information to the appraiser. We are required to analyze the contract and where do you think contract analysis begins? You guessed it with the realtor answering these questions.
In my practice I specialize in private or non lender appraisals such as pre listing appraisals. Was it based on a pre listing appraisal? Here is a good one how many showings did you have? Was it 10 showings in 5 days or 10 showings in 60 days? Do you think this information says something about the current market conditions?
Were there multiple offers? How many? The article states there were 10 other offers, what were the price levels & terms? Why was this offer selected? Let’s clear something up regarding offers. If it’s not written on a real estate contract and other offers are received by text or email or whatever other means you might receive it, guess what it’s not an offer to purchase. It’s very much like my friend says, you have to…
Watch this video and see what one of Chicago’s top commercial brokers has to say about what he does when he has multiple offers. As an appraiser I could not agree more.
Tips on getting a property to appraise out when the sales price is above list price.
Was the seller or buyer unduly motivated in any way? Is there other noteworthy information?
Does this mean if I provide this information that I’ll never have a problem with an appraisal again? Uhhhh no. You see appraisers take this information and see how it fits in the market. How are property values trending, what are current inventory levels, etc.
What are the takeaways?
- Appraisers are very capable of keeping up with rapidly changing markets.
- Realtors should attend EVERY home appraisal.
- Provide as much and specific information as possible, being vague here does not help the situation.
Do you want to know what is happening in your market? Let me know in the comments below.
Did I leave anything out or do you want to join the conversation? Let me know in the comments below.
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Thanks for reading,