To Maximize Sales Price, Your Property Has To Appraise

In talking with my Broker colleagues, when prices fall, everyone struggles with deals falling through due to low appraisals. When a property does not appraise out, the buyer has to not only be willing to pay over market, but also be capable of making the additional down payment, as the loan is based on appraised value versus purchase price. Sometimes the buyer kills the deal and even fires their broker — sometimes the buyer sucks it up and pays more with a bigger down payment — other times the seller capitulates and lowers the price, and yet in other instances it’s a negotiated new price compromise.

• They will only look for comps that are the exact same product type so even if they are valuing a Townhome that is worth more than a condo all things being equal, they would not use a condo comp
• Appraisers do not consider market timing differences, because in 2009 they eliminated “time adjustments”
• They limit themselves to just the last 6 months on their first 3 primary comps
• Appraisers do not always understand the value nuances of different areas and streets. For instance, if you have a condo at Oakley and Potomac in Wicker Park, just going two streets west to Artesian & Potomac in Humboldt Park has a significant value impact.

At the end of the day, an appraisal is a financing tool and an obstacle to getting the deal done, where a competent broker is the best resource for a true valuation. Once you have a bad appraisal, it’s very hard to fight them as Appraiser almost never change their findings. Sometimes the bank will do a 2^nd appraisal, however, this is usually not a strategy that works as they just average the second appraisal with the first. Meaning, if you under appraise by 20K on the 1^st appraisal, you would have over appraised by 20K on the second which is not likely. It’s better to just fire lender, even though it’s not their fault, and hire a new lender who is able to give a fresh start. Or better yet just doing everything possible to make sure you appraise out on the front end!

• I pull comps that support the contract price. You’d be surprised to hear how many agents don’t do this
• When I pull comps, I know that I can include not only closed comps but also any under contract comps or pending comps that have not closed yet

I then actually call the Listing Agent, find out what price the property is going to close at to make sure it helps my case, and then ask the Listing Agent to agree to talk to the appraiser when he calls. Most agents don’t even know you can include pending/under contract comps. Further, most agents don’t like to talk to appraisers, so you have to use your relationships/charm and do some Broker to Broker marketing to get them to cooperate.

» In periods when prices are rising, this is the way to get the deal done while pending deals are at higher prices! «

• My lender at Guaranteed Rate is the #2 underwriter in the State of IL, so he gets to select 5 appraisers that he has worked with before, and one of the 5 is randomly sub-selected. Most lenders don’t have this luxury of picking 5 appraisers that are pre-vetted.
• I meet the appraiser at the property, I build rapport with them, and I make it a point to show the features in the home that he can make a value adjustment.
• I bring the following documentation in a manilla folder with my card stapled to the front to the appraisal with me:
  • Closed, Under Contract, & Pending comps supporting my Sales Contract.
  • A floor plan which makes him happy so that they don’t have to measure.
  • A past appraisal from my seller if we have one that supports our Sales price.
  • Other offers on the property if we have them showing that it was multiple bid and our price is the “Market Value”.
• Lastly, I ask for the value I need, and express to them that my deal will die if we don’t get that amount. You got to have the confidence to ask for the sale!

Well, I want your sale!  See how I did that, lol. Let me sell your home for you and maximize your closing price!

Ask Nagel!  Call Greg at 312-933-1432 and let’s get your property sold for more than you thought it could!