When your Appraisal is Less than Contracted Price – OK, now I will say in my experience, I have seen an appraisal get overturned maybe a handful of times, if that they don’t like to say they’re wrong, they don’t like to change them.
They follow guidelines. They do it. They believe. And, you know, if it’s something that wasn’t presented to them and nobody let them know that that, you know, certain things existed, how are they going to know?
Right. So the other thing is, is say you have something that sold that was off market. That’s a good place to factor that in that market property.
So, for example, in a new construction area, you know, not everything would be recorded in netas, right, for them to have access to. So what they do is that’s my car. So what they’ll do is a lot of times they will go to the builders and they will try to get comps from them of anything that was off market in.
The builders will give them a closing statement or something to verify that this actually sold for this price. So if you’re in a new construction area, that’s something really important that you may want to do as well, is go to the builders and, you know, ask that question yourself. What properties have been built and sold and closed that weren’t on the market, on the open market?
But I think it’s ultimately the sellers responsibility to have worked with the appraisal and given an appraisal packet to defend the price of the property is sold for. If you are representing your buyer, your job is to give the best possible property, the best possible terms, given the current market condition for that. And sometimes you want that lower price.
So sometimes you can be doing your happy dance, but understand that there are still other things that go into it. And for your client, sometimes the price is is the most important thing, but sometimes the terms or the down payment are equally more important. And if the buyer has to bring more money to closing and they don’t necessarily have that than it does present a problem.
So you’d be doing your happy dance if this was a property where there wasn’t where it was cash and there wasn’t a loan where your person was putting down more than the necessary kind of minimum amount and they could restructure it and it’ll work out in their favour. And the problem is, once you have that appraisal on the property and a bunch of different situations that the appraisal sticks with the property, so to speak, on certain loan programs. Right. FHA, I believe. Yeah.
So they can’t resell it to somebody else and do something different. So now they kind of have a situation and you are in a better negotiating position because no matter who else comes in, you’d have to do that. So I just think it puts you in a good position as a buyer’s agent to be able to do that. Now it’s going to create work and it’s going to create a little bit of stress.
But every deal, remember, that’s your job as an agent is to understand that they’re stressful times and to be the calm one in the room just to breathe and understand what’s going on and to reset and make your clients feel comfortable.
Yeah, and just because it comes in under value doesn’t mean the lender can’t lend on it right after some options.
So it may be that they’re putting a large amount of money down and their loan to value ratio is is so fine and it’s no big deal.
I take it as an opportunity to show your greatness as an agent, to show your calmness to, you know, and to get better terms, because it’s not a time during, like, option period.
It’s not a time to renegotiate the price. Inspections are not a time to renegotiate price. However, if all of a sudden it doesn’t raise now, you have a totally different situation. So it’s probably in your client’s best interest right now. Now you just have to find out how to get over that hurdle. And that’s the person that gets the referrals, the agent that can walk the client through this calmly, that can take advantage of it. They can say like, hey, I’m the adult in the room right now and let’s do a deal with this equation.
Yes. And like I said, they should have been discussed upfront that, hey, this can happen. You know, you need to make sure you’re talking with your clients about that. That is an option that can happen. So what do you do if if this happens? You have a couple of options, right? What a lender.
But you can renegotiate the price, like you said, and request that the seller bring that price down and you move forward or if your buyer is truly I understand that I I truly believe that with the market as it is, I’m fine with bringing the additional money to make up the difference and continuing on with the loan or they can terminate and get their earnings back. So those are the three options you have.
But like, let’s just get the lower price for. Person, because it’s the house they probably really wanted and they’ll be OK. Now you have to understand the other conditions to sit in an appreciating market. Prices are going up in value and it’s something good that you really want to take advantage of. Just knowing the market conditions is going to be a big deal here. And we have seen prices going up as people are moving one step in a direction towards more space in their residential properties.
So I’m totally excited about their sales in the last two years and those prices have gone up like thirty five percent. I know that’s ridiculous is I don’t panic and we can talk through it and just, you know, again, it kind of goes back to our first topic of transparency.
If you’re upfront, honest, and let them know everything that’s going on and could happen, then they’re prepared so they don’t freak out and panic in the event this.
Welcome to Referral City. You as an agent in this situation will be well off. You have to do this properly, execute and you’ll get a referral.
Closing topic, you know, hey, I’m like, I’m cool, you want to tell a story? Sure. OK, you tell a story, I’ll tell the story.