Archive for February, 2012

What If The Clarkston MI House Doesn’t Appraise?

A common misconception is that the house must appraise for sale price and if it doesn’t then the seller has to come down to make up the difference.

First of all everything is negotiable. When you make an offer on a house you can specify that the house must appraise for the sale price. Or you can specify that the house must appraise for X below sale price.

Why would you negotiate in a lower appraisal amount you ask? There are many reasons.

You may be in a multiple offer situation and this is a great way to strengthen your offer.

You may be able to get the seller to come down a bit more if they’re more comfortable about your ability to close.

There are many reasons a house might not appraise and they have nothing to do with value.

First of all the appraiser does not work for the buyer. The appraiser is hired by the lender to protect the lender’s interests- period.

The appraiser has to follow the guidelines specified by the lender as well as government guidelines. I recently had a sale in a subdivision in Metamora- a fairly rural area. The appraiser was told to go no farther back than 6 months but preferably 3 months and no farther than 3 miles from the subject property. The criteria was just plain silly. There aren’t any other subs within 3 miles.

There may not be any comparable sales in the area. This is especially true in neighborhoods where there is a high amount of foreclosures.

If the lender uses an appraisal management company you may get an out of the area appraiser who doesn’t know the area. On the buyer side of a transaction about a year and a half ago we were in a multiple offer situation. 4 people wanted this house the first weekend it hit the market. We were the strongest offer (not the highest- but strong buyers who offered incentives to the sellers other than price), and when the appraiser went out the appraisal came in at $80,000 under the agreed upon price. We changed lenders and ordered a second appraisal and it came in $62,000 higher. 2 licensed appraisers came in $62,000 apart on a house that was selling for less than $400,000.

I actually had one lender brag that the appraisers they used tended to come in low! His attitude was it put the buyer in a position to negotiate a lower price. Well, all the low appraisal did was require my buyer to pony up the difference. We had seen many of the comparable sales the appraiser used and all it did was confirm for the buyer that he was getting a great deal and was fortunate to have the difference in cash so he didn’t lose the house he had his heart set on.

So back to the original question I titled this post with. What happens if the appraisal comes in low?

The seller may come down to meet the appraised value.

The buyer and seller may negotiate a price some place between the original price and the appraised price.

The buyer may have to come up with the difference.

The deal may die and someone else will get the house that you wanted enough to make an offer, put up a deposit for and pay for inspections on. And you get to start your home search over and hope that the interest rates didn’t increase in the meantime.

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Jackie Hawley
ReMax Encore, Clarkston
Cell: (248) 736-6407




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How Much Does The Interest Rate Really Affect Your Buying Power?

I am going through old listings that couldn’t sell at the owner’s desired price and through files of home owners who didn’t try to sell after getting a market analysis (CMA) for their home because of the value at that time. The good news for those homeowners is that prices are coming up in the Clarkston area and have been for the past couple years. But for buyers- if you look at your payment instead of price- prices are still very low.

As an example I just pulled up a listing I had in 2007 that was asking $400,000. At that time the interest rate for mortgages was at an average of 6.34%. When I checked the Freddie Mac web site I found the average interest rate last month was 3.92%.

What does this mean from the buyer perspective? If you would have bought that particular house for $305,000 in 2007 your payment (principle and interest) would be the same as if you were to pay $400,000 today. That’s a hundred thousand dollars worth of buying power just in the difference in the interest rate.

But it gets better!!! The property taxes on that house have dropped from just over $6k/year to just over $4600/year. That’s $116/month savings in your house payment.

Interest rates are not going to stay this low forever. Home prices are on the rise– not skyrocketing, but steadily rising. If you have been holding off buying waiting for the market to hit bottom I think we may be there- especially when you factor in the mortgage interest rate and property taxes. AND the cherry on top is the fact that your property taxes will be capped to 5% or the rate of inflation as long as the house is your primary residence. So for the example above it will take quite a while before property taxes are back at 2007 amounts.

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Jackie Hawley
ReMax Encore, Clarkston

Cell: (248) 736-6407


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