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Low Appraisals Add To Seller’s Woes…Setting Your House Price, Clinic #1

access_time(Updated: Apr 12, 2016)homeBlog Home

Low appraisals leave sellers in a state of despair

Getting the highest price for the sale of your home is usually a seller’s primary objective. But even if you sell the house at a high price, it still has to appraise or it will never make it to closing.

Our experience in home sales in the Detroit, Michigan suburbs is that sellers, with the help of their agents, usually price a property too high. This results in a lower appraisal and an unsold house after weeks or even months of being off the market.

This blog provides the first in a series of house pricing clinics that you can use to objectively set the correct asking price for your home that will net you the most dollars after all is said and done at the closing table.

Imagine having to run a marathon in almost impossible weather conditions. In fact, it is the worst race-day weather in almost twenty years. Somehow, you grit it out. Determination enables you to keep one foot in front of the other, even though the finish line is still miles ahead of you.
                                                               
How would you feel if you were that runner? That’s how sellers feel when they are told, about a week prior to closing, that their property won’t close because of a low appraisal. It’s a long walk back to the starting line.

Low appraisals are becoming more common in our correcting market, and it’s adding to the frustration levels of sellers, agents and even the appraisers. However, there are steps that sellers and agents can take to possibly improve the appraisal. In the cases where they cannot, they can at least minimize the disruption a low appraisal can cause.

The first step in avoiding a low appraisal is setting the price right the first time and getting a sale at a price that will appraise at current market conditions. Click here for advice on how to set the price right. 

Secondly, in our market where the price is decreasing, you’ll want to get the house sold as quickly as possible. Staging the house is crucial to getting it sold quickly at the right price. We often tell our clients who we represent in the sale of their home "We are in a price war and a beauty contest". Not only does the house have to be priced right, it also has to look great. Our home staging checklist will help in taking you through the things that must be done before putting your house on the market.

If you set the price right and made the house look like a gem, chances are you will get a sale in a reasonable time period. Once that happens it is crucial to get an appraisal fast. We work diligently with the selling agent and bank to get the appraisal fast. Every day the house is off the market is a loss to the seller if the appraisal comes in low. We want to know about appraisal issues right away so we can get the house back on the market if the issue is unresolvable. An added benefit is that often there were other buyers for the house that may still be in the market to buy. We want to resurrect them if possible

If their is an appraisal issue we work with the appraiser to try to arrive at a solution. Understand that the appraiser’s livelihood is tied to the success of our market, just like ours. Appraisers want every property to appraise, as long as they have the proper supporting information. Working together, instead of yelling and pointing fingers at each other, will better accomplish that.
 
Sellers may be able to help the cause, particularly if they know inside information on a recent sale in their neighborhood, such as a death or divorce, something that would explain a lower-than-normal sales price. Appraisers welcome input and reasons to use or disqualify a particular sale. Agents can do a better job of being cooperative with appraisers when they call to verify the details of a sale. The information they give may help rescue a transaction.
 
Buyers can lose because of a low appraisal too. Therefore, agents should be proactive in helping a buyer select a lender. Local lenders use local appraisers. Buyers take caution: chasing the “lowest rate of the day” from one of the many Internet lenders may not be the best path to take. Internet lenders sometimes use out-of-area appraisers, who do not know the nuances of the local market. Not only that, they may take the attitude that they will never have to do business with us again, so why go the extra mile in order to make the deal happen?
 
When a local lender is selected, agents should ask to see the list of approved appraisers. If a familiar name pops up, the agent may be able to request that person. It’s always better to work with someone you know. Consumers choosing an agent should request a list of all appraisers they have worked with in the past.
 
One of the most prudent things to do is to require the appraisal be done as close to the effective date of the contract as possible. Sellers, if you are selling privately, you should write this into the contract because if you do not specify the timing of the appraisal, then it may be completed according to someone else’s convenience, not yours. It may even take place after the mortgage contingency period is over. However, it could still ruin the sale because an acceptable appraisal is usually one of the conditions of loan approval. Either way, the property may not close. Aggressive buyers may even delay the appraisal and use it to reopen negotiations to the unsuspecting seller. Sellers, your negotiation strength is weakened somewhat once your moving truck is loaded.  

 

A low appraisal does not have to kill the deal. Remedies include getting a second appraisal, renegotiation of the price, or the buyer can increase the down payment to cover the shortage. Regardless, the marathon process of selling requires stamina. Therefore, when you run the race in the conditions we face, run it once. If you have to start over because of a low appraisal, the sooner off the starting line you find out, the better.

If you are ready to put your house on the market call us and ask for a detailed Marketing Market Analysis (MMA). Most agents will provide a Comparative Market Analysis (CMA) which prices the house based on recent sales. Our MMA prices the house using recent sales and our Marketing systems to help you obtain the best price based on today’s market. Setting that initial price is the first step to getting the best price.

Subscribe to this site and watch for more blogs on pricing your house in today’s challenging market.

2 thoughts on “Low Appraisals Add To Seller’s Woes…Setting Your House Price, Clinic #1”

  1. we are on the market right now with an agent that probably priced our house too high and we have not been getting any takers. What would you r advice be at this time. Are we too late to price it properly. We need to sell and move on.

  2. James

    Agents are not advising their clients properly. You need someone who will tell you what you need to know not what you want to hear.

    Find an agent who knows the market and has a very agressive marketing plan

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