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Tuesday, October 26, 2010

"Why Didn't it Appraise?"

Multiple Choice Quiz

Test your knowledge of today's real estate market, and answer the following question:

Which of the following are to blame when a home does not appraise pursuant to a Purchase Agreement and mortgage application?

(Note: the home being appraised is called the "subject home"; its peers, which establish value, are individually known as "Comp's," or "Comparable Sold Properties").

A. Nearby foreclosures torpedoed the value of the (non-foreclosure) subject home;
B. The appraiser didn't know the area;
C. The appraiser didn't know various negatives associated with one or more Comp's (dated Kitchen, poor condition, bad floor plan, etc.) that depressed their market value.
D. The appraiser was missing the last, fully executed Counter-Offer or Purchase Agreement Addendum -- and therefore was using a too-high price.

Answer: all of the above.

Of the foregoing, the only circumstance that is entirely avoidable is "D."

However, an attentive, hands-on Realtor can also help avert/mitigate "B." and "C." by being proactive.

P.S.: And yes, some homes fail to appraise these days . . . because the purchase price simply isn't supported by valid Comp's.

I'd put that number at 15% or so -- up from 5% a few years ago.

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