What's an Appraisal and Why Does It Matter?

This series, Love Selling Your Home: Minimize Your Stress, Maximize Your Profit, is a step-by-step guide that covers everything you need to know to sell your home in today’s market, from finding a real estate agent to all the way to settlement day. Just because your home is under contract doesn’t mean it’s time to celebrate just yet. It’s time for your home to be appraised if you buyers are getting a loan, and the results could sidetrack the entire transaction. This is an important step in the closing process. The sale of your home can’t move forward until the appraisal is done and the lender has given its stamp of approval. You don’t want the appraised value to come in lower than the contract price.  If so, the lender won’t approve a loan for more than what the home is worth. That means that the price you’ve set for your home is not going to happen! Now is a good time to understand this process and know what you can do to protect yourself as a seller:  Home Appraisal 101 What is an appraisal? An appraisal is an unbiased professional opinion of a home’s value that the lender will use to determine if they will lend money to the buyer of your home.  Usually the lender will order the appraisal but the borrower will pay for the report. Don’t confuse this with a home inspection, which is entirely different. Appraisers are not home inspectors looking for leaky roofs, testing appliances, etc. Your buyer will need to get a home inspection after the appraisal comes through. Why does it matter? The lender wants to make sure the buyer is not over borrowing and that this is a sound investment for them in case the buyer defaults on the loan. The lender also wants to ensure that this home exists and is habitable. If you’ve got an all cash buyer, you won’t have to deal with a bank or appraisals at all. That’s a big plus as a seller. What does it entail? An appraiser will tour the home and make notes about how it compares to other homes that have sold recently nearby. A licensed appraiser’s report is much more detailed than a comparative market analysis and is the only valuation report a lender will use. The valuation is based on market trends, supply and demand, duration on the market, and also considers any extenuating factors such as upgrades or something like being on a higher floor or end unit.  It also will take into consideration the home’s condition, location, and features. The report also will include statements on any issues that may hurt or help the property’s value. Since it’s never an “apple-to-apple” comparison, the appraiser will make adjustments to the appraisal for some features of a home — a finished basement, a coveted view, updated appliances or HVAC systems. Remember, some improvements don’t add as much value as you would like … such as a new half bath, landscaping, etc. For a condo unit, an appraiser will consider the number of units in the condominium community, how many are on the market and how many were sold.  The most weight is given to units that have sold in the same building since buildings are so different, even in the same neighborhood. Be Aware of Appraisal Law The appraisal process went through a change a few years back when the Home Valuation Code of Conduct was passed. This law was meant to make appraisers more independent and not “hired” by the real estate agents, buyer, seller, or bank handling the transaction. But in some cases, appraisers may not be local to the area where they were appraising homes, especially when appraisal management companies are involved. There’s been some questioning of how well these appraisers know the neighborhoods and the “true” value of a home when an appraisal comes in too low. What Can You Do to Protect Yourself? You want to have an appraiser who knows the local area and has worked in your neighborhood beforehand. This is someone who could recognize any skewed comps if that’s ever the case.  Make sure your lender is working with such appraisers. As a seller, you could get an appraisal yourself before you even list your home to help you determine the asking price.  You could give this prelisting appraisal to the buyer’s appraiser to add to the data and perspective of the final report. You should question a low appraisal to make sure nothing was overlooked or inaccurate in the report (see more details below).  What If You Get a Low Appraisal? If an appraisal comes in lower than the contract price, it may mean the end of the sale with this particular buyer. However, there are steps you can take to help avoid this and to also move the sale along. It might be worth the time to work with this buyer rather than start all over again, but you just might have to do that if many of these actions below don’t work. Provide details on any home improvements to the appraiser so nothing is missed. Your agent can contact the lender so they can connect with the appraiser who is hired to evaluate your home. Ask to review the appraisal to see if any adjustments were made, especially if you submitted information to the appraiser. A lender has to comply with the request within 30 days. Appeal the appraisal for a reconsideration of the value of the home. Provide the comparables you and your agent think represent the home’s value better and why.   You will need to show any discrepancies between the appraisal and any improvements or unique features of the home. Ask for another appraisal, but you would have to pay for it. However, if it’s an FHA loan, an appraisal stays with that home for 6 months so you can’t ask to switch lenders or get a new appraisal. Buyers, on the other hand, could switch lenders and start over with a new appraiser. Ask the buyers if they are willing or able to pay for the higher contract price and make up the difference themselves. Some buyers may be willing or able to make a larger down payment. If it’s a tight market, the buyers may feel the pressure to pay since there could be another buyer in line who is able and willing. Renegotiate with the buyer and to offer a lower price or pay for closings costs. If you don’t have any other potential buyers, you may need to make such accommodations so that the sale does go through. The appraisal part of the under contract phase is crucial to making sure that you get the price you think you will and you make it to settlement.  I do something most agents do not—I meet the appraiser at my seller’s home and give them a packet full of information about why this home should appraise, including a list and cost of improvements that were done to the property, a list of comps to support the price, and even information about how many offers we had and why we chose this particular offer.  This is the kind of extra steps I take to make sure my sellers get the most out of their home with the least amount of hassle.  I’d love to help you do the same.  Email me and let’s set up a time to meet to see if we are a good fit for selling your home.  Be sure to contact me a few months before you want to get started, as my listing schedule fills up quickly! Stay tuned for next week’s article of my Love Selling Your Home series — Pre-Closing Tasks to Check Off Your List. It will provide a handy checklist to make sure you get it all done and even tell you what to expect from the buyers (such as an inspection).

How to Negotiate From Contract Through Inspection

This series, Love Selling Your Home: Minimize Your Stress, Maximize Your Profit, is a step-by-step guide that covers everything you need to know to sell your home in today’s market, from finding a real estate agent to all the way to settlement day. Selling a home is an emotional experience for many of us. Your home is a part of who you are and where you’ve been in your life. But, first and foremost, selling a home is actually a business transaction with a buyer.  You don’t want to get swayed by emotion and end up making negotiation mistakes that you’ll regret later in your final contract with the buyers. Remember, the outcome of this transaction can affect your next step as a homeowner. But don’t forget that both you AND the buyer want to close the deal.  That’s why you shouldn’t have a “winner take all” mindset but be willing to compromise when necessary while still looking out for your best interests. Here are some smart tips for negotiating the sale of your home: Determine the buyer’s motivation and timing. Why does the buyer want to buy your home?  Buyers can give clues to how long the process will take. They also may have a home to sell, which can complicate and prolong the proceedings. However, some circumstance (moving from out of town for a job, a baby on the way) can actually hasten your dealings. Keep your ears and eyes open so you have a better sense of what your buyers want. Keep the conversation going. Sellers should always respond to an offer. By submitting a counter-offer, you can start a process in which you can see how high the buyer is willing to go. Remember, you want to keep the negotiation moving. The longer you stay in the negotiation, the more likely you’ll reach a satisfactory conclusion since all parties are invested in getting the deal done.  Also, if you have more than one offer, it’s usually best to disclose this information to all parties to maintain trust and to maximize your ability to obtain the best price. Have a positive outlook on contingencies to get the deal done.  As a seller, it is best to appreciate a buyer’s willingness to do business even if they have a contingency. You can do your part to make the sale successful, but also assess the situation before you do proceed with them. This is especially true if there are any repair issues that may arise after the inspection.  Be willing to work with the buyers and come to a mutual agreement. If they want you to fix the items before the sale can be completed OR you reduce the price so that they can hire their own contractors.  However, do be careful that you don’t accept an offer that contains a high-risk contingency like waiting for the buyer to sell their existing home, a long option period, or a buyer without approved financing. You don’t want this to lead to a dead end. Sweeten the deal if it gets you what you need or want in return. As a seller, it’s not a bad idea to give a concession that can help seal the deal.  It doesn’t have to be price, it can be financing, or something on the property the buyer may want. Making a concession keeps the negotiation process moving and shows you want to work with the buyers in some way. Remember, you want to move out of this house and not be stuck!  I love negotiating for my clients with the goal of getting my sellers what they’ve said they wanted out of the situation.  It’s a delicate dance and my intention is always to have the buyers want to agree too!  There are ways to do that so everyone feels like they’ve won, especially my seller clients.  With a lifetime of negotiating experience I have saved sellers thousands of dollars that would have otherwise gone to the buyer, I know how to get everyone on the same page and get my clients what they want and need to make the deal work, and walk away feeling good.  I’d be happy to put my negotiation skills to work for you.  Just email me a few months before you want to start getting your home ready for sale and we can talk through everything we need to do to not only make the negotiations a breeze, but also what we can do well before this point to get the buyers to want to agree to everything you’ve asked of them.  Stay tuned for next week’s What’s an Appraisal and Why Does It Matter? You’ll learn more about this critical step when you have a home under contract. It’s sometimes a nail-biting experience since you don’t want the appraised value of your home to come in below the asking price. I hope you keep enjoying my Love Selling Your Home series!

When to Say "Yes" to an Offer

This series, Love Selling Your Home: Minimize Your Stress, Maximize Your Profit, is a step-by-step guide that covers everything you need to know to sell your home in today’s market, from finding a real estate agent to all the way to settlement day. How do you know if you’re selecting the BEST offer for the home you’re selling?  Believe it or not, it’s not always about the money! Here are some smart strategies and tips to keep in mind so that your home is sold to the right buyer, for the right price, and for less stress and anxiety (a big plus for you): Know What You Want Most  First and foremost, you need to decide where you’re willing to be flexible and where you don’t want to budge BEFORE you list your home. You will face several negotiation tactics from buyers, so know where you stand on certain terms before you’re in the thick of it. Do you want the closing date to be sooner than later since you want to move on to a new home you’ve already bought?  Or, if price is very important, are you willing to accept a higher offer even if there are contingencies that you don’t like? Know your deal breakers so you can quickly eliminate the offers that don’t meet them and keep the review process moving in a timely manner. Don’t Be Swayed by Price Only Don’t assume the highest offer is the best offer. Really evaluate each buyer’s entire financial package. There are several factors that can improve a lower offer and guarantee you’ll make it to closing as a happy seller: A higher down payment with less financing or all cash down signals a buyer is financially ready to buy with little hassle so you can move forward on the deal. If timing is critical for you, look at the loan type of each buyer, since FHA loans can sometimes slow things down compared to conventional loans. Buyers who offer a higher earnest money deposit mean they are serious and committed, and you’ll have no worries that they will walk away. Definitely consider buyers who are willing to waive any contingencies or seem willing to work with you on certain terms. No strings attached can be a big plus, even if the price is lower! Ask for a financial information statement.  Nowadays, a lender letter isn’t enough, and you should evaluate the financing strength of each buyer.  By seeing their financial pros and cons, you’ll get a more complete picture of what they can truly afford. Don’t Take Advantage Don’t be hard-nosed, don’t mislead, don’t stall, and don’t show a lack of appreciation during the negotiation period before you decide on an offer. Disclose the same information to all of the buyers and give them the same deadlines. Remember, buyers can walk away and not want your home if you seem difficult or you keep changing things. Plus, your overall demeanor could backfire when you’re down to one party and you still need to work with each other to complete the transaction. It all comes down to “playing nice” while still using strategic negotiation tactics to sell your home. To Read or Not to Read those Love Letters If multiple buyers are vying for your home, each will most likely write a letter and possibly send photos showing that they are the perfect buyers who will love your home just as much as you. Here’s their chance to stand apart from the competition and tug at your emotions as you decide on their offer. Reading these personal appeals could either make your decision easier or much, much harder. You usually want to make selling your home a straightforward business transaction and not get mixed up in emotions.  However, selling a home you love IS emotional and very personal, so tread lightly here and keep it all in perspective. The more you know about a particular buyer, the harder it may be to disappointment them (and their cute children!). As you can see, it takes some finesse and tactics on your part to make sure you say “Yes” to the right offer for your particular situation and home. One of the things I excel at is knowing the pros and cons of each offer you receive and helping you pick the one that not only promises you the most money, but that will also actually make it to settlement.  There are a lot of hidden things to look for in a contract and I love negotiating the best possible outcome for my sellers.  I’d love for you to become my next seller client.  The first step is for us to see if working together is a good fit.  If I’m not the very best agent to help you get the most out of your home or investment property, I’ll give you suggestions on who you can call, one of my other successful agent friends.  So, a few months before you are getting ready to put your home on the market, contact me, so we can set up a time to go through everything from getting your home ready, to pricing, to how to know which offer is the best for you.  Stay tuned for next week’s How to Negotiate from Contract through Inspection. Every seller needs to understand negotiation tactics. Here’s your guide on how to handle contingencies and other items that may arise during the negotiation period.

Marketing Your Home to Sell Quickly and Profitably

This series, Love Selling Your Home: Minimize Your Stress, Maximize Your Profit, is a step-by-step guide that covers everything you need to know to sell your home in today’s market, from finding a real estate agent to all the way to settlement day. You love (or loved) your home and now you want others to love it too! You want the most strategic and effective marketing plan so your home gets the attention and foot traffic it deserves. Selling your home will be approached as the same way a PR or advertising client would be at the start of an ad or public relations campaign. Ideally, we start well before you actually put it on the market to spend time analyzing your situation and coming up with a specific marketing plan just for your home. Working together, we’ll first look at your home as a product to sell and ask the good old basic marketing questions such as “Who is your target audience?”; “What are the unique selling features of this product?”; and lastly (this is a biggie!) “What sets your product apart from all the others?” We’ll then answer these questions about your home from a buyer’s perspective and then market and advertise your home accordingly. The king of advertising, Mad Men’s Don Draper, says, “Advertising is based on happiness….we invent want.”  Our strategy sessions are critical in finding this “want.” It’s time to think outside the box, and this unique sales approach takes selling your home to a new level by asking pointed questions: •What is your goal for this sale … Do you have to sell quickly because of a job relocation? Or, do you want the highest price possible so you can buy that next “move-up” home? •What is your home’s unique story and how do we tell it to buyers? •Who’s most likely to buy your home? What do they want in a home and how do we reach them? •What are a few quick and inexpensive changes we can make to your home in order to appeal to the most potential buyers and get you the highest price possible? •What surrounding attractions and community amenities will draw in your target market? What lifestyle are we selling? Today’s buyers are better prepared than ever. They’re tapped into the Internet and do their own electronic searches, receive seller disclosure forms, order home inspections, etc. PHEW… but we’re just as prepared since we really know buyers, how they think, and how best to reach them. We’re just as tech-savvy and will promote your home via Internet and smartphone. We make sure that your home hits not only the MLS, but all the other listing websites out there—Trulia, Redfin, Zillow.  It’s everywhere so everyone can find it.  We also truly know the “curb appeal” importance of Internet listings in today’s market. Your home photos will shine online and not scare away any potential buyers. We’ll even help you prepare your home and make it look its best for this HGTV-influenced market. After pricing your home correctly and implementing these simple selling strategies, you’ll have an offer in no time. I’d love to share my marketing strategies more specifically with you and also show you examples of homes I’ve sold in your neighborhood.  Email me so we can meet to discuss the unique way I market your home to ensure you are getting the most out of your biggest investment.  I can’t wait to tell you all about it—I can guarantee no other agent in the area markets homes quiet like this.  Stay tuned for more of my Love Selling Your Home series! Next week, you’ll get the inside scoop on When to Say “Yes” to an Offer.  How do you decide which is the best offer? Find out right here!