Nov
30
Buying or Selling a Lehigh Valley Home - beware of comps!
Posted by Jill Fuhrer under For Buyers, For Sellers, General Information
It’s true, many times sales come to a screeching halt in the Lehigh Valley due to the bank ordered appraisals, which is really a new occurrence since the downturn of the market. Here is the scenario of a recent transaction which fell apart due to bank appraisals. An Easton PA homeowner lists their home, we provide comps (always within a 0-6month period) to help determine price. Our sellers wanted to be aggressive since they were relocating out of the area and did not want the home on the market through the winter. We all agreed on a price we felt would move the home fairly quickly. Within a month the home was under agreement. All parties had an agreed upon contract. What happens next is where it get tricky, and we are seeing this problem pop up in a large number of home contracts recently.The mortgage company providing the loan hires an independent appraiser of their choice to do the appraisal. The appraiser did not go into the home, but instead did a “drive by” appraisal and used comps to determine his price. This appraisal came in over 20,000 under the agreed upon price per the contract and this is all they would loan the buyer.
The seller, understandable upset ordered his own appraisal, which was still a few thousand under the agreed upon price but far from 20,000. The buyer ended up walking in this case. The seller had the option to drop his price down to what the bank would loan but strongly felt his home was underapprasied. The home went back on the market, was under agreement in about 2 weeks. The price had come down to the sellers appraisal price, so we assumed we were good. Again, the home went under agreement but the banks ( a different bank) appraisal came in low once again about 15,000 off. So again, the buyers decided to walk when the seller would not drop his price to what this bank appraised the home for.
In the end, the second buyers and sellers did come to an agreed upon price. They went with a different mortgage company and another appraisal was done and it was a lot closer to the one the seller had completed. The buyers had viewed many homes and were sure this home was well worth what was being asked, but the appraisal did cast doubt. The seller conceded more money then he ever expected but this seemed to be the lesser of the evils when faced with putting it back on the market to face yet another appraisal.
It seems banks and appraisers are being extremely cautious about lending money on homes that may not be worth the negotiated price in a few months time. Its almost like they are anticipating a drop in value and count that as part of the appraisal.
I always cite the pendulum effect. A few years ago, it seemed appraisers were willing to inflate prices to get the loan done, which helped account for the rising cost of homes but now its completely the opposite. After getting some hands slapped and a reality check on what happened when the lending world was too lenient we are now facing a tightening which is often times leading to renegotiation of the loans or with deals falling apart. There is a new push for appraisals to only include comps less then 90 days old, but with so few homes actually selling this is not always doable. My guess is once our economy settles and home sales stabilize we will see the pendulum swing back to the middle again, where in my opinion is where it works out best for all parties.
Jill and Ron Fuhrer
Easton, Nazareth and Bethlehem Area Realtors
484-241-5186
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