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Archive for January, 2013

Is the Appraisal for Your Protection? Oakland County MI Real Estate Home Sales

When buying a home in Oakland County Michigan a standard contingency is financing (the buyer obtaining a mortgage for the house). Normally, part of the financing process is an appraisal, and the cost of the appraisal is born by the purchaser.

  • So is this the purchaser’s appraisal?
  • And is the appraisal for the protection of the purchaser?

The answers are no and no.

If it really was the buyer’s appraisal, the buyer would get a say in who the appraiser is. Or at least the buyer’s loan officer would get a say.

Loans mortgage appraisalsThe appraisal is for the protection of the lender. The lender loans money to a purchaser, and that money is secured by the house and, rightfully, the lender wants to make sure the value is there.

Because of some of the asinine changes in the mortgage process over the past few years, the loan officer is no longer able to hire, or even speak to, the appraiser. The lender (loan officer) contacts an appraisal management company who then assigns an appraiser. And like in anything in life, there are good and bad appraisers.

So you the consumer can interview and choose the best real estate agent to work with. Interview and choose the best loan officer to work with, choose the best home inspector, best insurance agent, best title company … But no say on who appraises the home you are trying to buy.

Appraisers themselves are finding themselves under scrutiny because some want to blame them for the housing mess we are currently in. And the result has been overly cautious appraisers. And many inconsistencies in appraisals.

I’ve had multiple appraisals on the same house come in as much as $100K+ apart. Another one where 2 appraisers for the same house within a week of each other came in $74K apart.

I had another sale where I was on the listing end (a short sale) and it was another property with multiple appraisals. Between the buyer and the lien holders there was a total of 5 appraisals. 5 appraisers came in with 5 different values.

horse racing first and last equalOne of the main problems I’m seeing on the appraisals is the appraisers aren’t giving value for quality. Everything is size and location with very few adjustments, and those adjustments are for things like walk out basement vs standard basement. Maybe a few thousand for a finished basement vs an unfinished basement. If the comparable sales are in the same sub you may see an adjustment for location within the sub.

I’m not seeing credit given for quality. Top of the line Anderson or Pella windows will get zero value. Wood interior doors as opposed to the typical builder’s grade plastic feeling doors will get zero value. Upgraded cabinets, counters, light and plumbing fixtures will get ZERO value.

Now take 2 houses in the same or similar neighborhoods, and house a has builder grade everything and house b had the same floor plan built but upgraded everything mentioned above– should both those houses sell for the same price?

From a buyer perspective you may be thinking “Great! I can get $50K mattress money extra downpayment if house doesn't appraiseworth of upgrades for free.” Maybe not. You may find the perfect house and are willing and able to pay for quality. You spend $300+ on a home inspection. You spend $300+ on an appraisal, and the appraiser comes in $30K lower than the agreed upon price. The seller does not have to come down on price. If  the seller won’t come down, and if you still want the house, you would need to come up with the extra $30,000. If you don’t have it, you won’t get the house. You may have to settle for mediocrity in order to get a mortgage.

By the criteria many appraisers now feel they need to use, with the value determined solely by size and location, that is the same as saying the first place horse in the Kentucky Derby has the same value as the last place horse in the Kentucky Derby- all the same age, about the same height and all the same class of horse.

When I represent a buyer, I will perform a market analysis on the house you want to offer on. I will give you my opinion of value and back that opinion with comparable sales. I will also give my opinion on what I think the appraised value will be, and if there’s a difference, you will need to prepare yourself to possibly lose the house you want or pony up the difference. And if you are a person who feels that quality has value, be prepared to come up with additional down payment.

Hopefully this gives you a basic understanding about the appraisal process and value. If you have any questions or would like to see a copy of our purchase agreement, please don’t hesitate to call or email me.

My cell number is 248-736-6407.

And my email address is Jackie@JackieHawley.com

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Homes for Sale in Oakland County MI
Homes for Sale in Clarkston MI
Homes for Sale in Lake Orion MI
Homes for Sale in Oxford MI
Homes for Sale in Lapeer MI

www.MiRelocation.com

Preparing Your Home for Sale
Why List With Me

Marketing Your Home

Choosing a Buyer’s Agent

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Writing an Offer on an Oakland County Michigan Home

writing an offer on southeast michigan homesUnless you’re a cash buyer, our standard purchase agreement contains a financing contingency. Even if you are pre-qualified you need this contingency to protect yourself. If your financial situation changes after writing the offer (such as job loss) you need the protection of the financing contingency. It also protects you if the house has problems with mortgaging, such as appraising too low, clouded title, etc. When it comes to rural properties, the property can present many issues when it comes to obtaining the mortgage. I won’t get into those specifics here, but the bottom line- a standard contingency in the offer to purchase is financing.

Once the seller accepts your offer, their house is off the market while you fulfill the contingencies in the offer, so it is very important to submit a pre-approval letter with the offer. The pre-approval letter will state the down payment required from you, the type of mortgage you’re getting, how much of a mortgage you can afford, and needed seller’s concessions if any.

Actually, it’s important to get that letter before you even start looking at houses. I need to know what you can afford (or what you’re comfortable with- I bought much lower than the bank was willing to lend me) and the type of mortgage you will be getting. If you are getting a rural development loan, I will know not to look in Lake Orion for example, but 3 miles north into Oxford the houses would qualify- even in a sub. If you are going to go FHA, I would know not to show you fixers. Etc. So meeting with a good, honest, experienced loan officer, before you start looking, is also muy important. If you don’t already have a loan officer you like and trust, I can supply the contact information for one. More about that in a future post.

At the time we write the offer we also need to decide if you would like a home inspection, and what type of inspections you should get. Now some people think if they get an FHA loan that there is an automatic inspection built into that process. That is not correct. Your lender will send out an FHA approved APPRAISER who will look for repairs that FHA deems necessary, but that person IS NOT AN INSPECTOR.

If your offer is contingent upon the sale or closing of another property, we would include that in the offer. But beware- bank owned homes do not take offers subject to the sale of another property. If we make an offer subject to the closing of another property that you currently have an accepted offer on, we need to submit a copy of that offer with our offer to purchase. We want to submit as strong an offer as possible and to relieve the seller of any doubts of your ability to close. It’s much easier to negotiate from a position of power.

Other things included in the offer to purchase include “possession.” Or how long you are willing to let the seller live in the house once the sale is closed. They usually ask for a specific amount of time in the listing- 30 days or 60 days for example. After the closing the house is yours, and if there is possession, the current seller is now your tenant. They will typically pay you rent in the amount of your new house payment for any time they stay after closing, and that money is typically escrowed from their proceeds at closing. Possession is something we negotiate up front.

We also include time frames in the initial offer to purchase. We give them a certain amount of time to answer our offer. We give them a time frame in which you will make your formal mortgage application and a time frame for you to get a full mortgage commitment. We will include a time frame to close by.

For the most part, the above are the most popular contingencies included in an offer to purchase. Of course everybody’s situation is different, and sometimes there are contingencies that may be unique to your situation. I wrote an offer recently that was subject to the buyer finalizing their job transfer. But no matter what the contingency is, we must include time frames.

One other issue that is not covered above is the EMD or earnest money deposit also known as a good writing an offer on southeast michigan homesfaith deposit. It is usually a check I collect from you at the time we make the offer that shows your “good faith.” Hence the term good faith deposit. If there’s a problem on the inspection or financing, and the sale doesn’t close, you get that money back. If everything goes just fine, and we close on the property, that deposit is applied toward you closing costs/down payment. If everything goes just fine and all the contingencies are fulfilled satisfactorily, and you just change your mind and back out- then that deposit goes to the seller.

Hopefully this gives you a basic understanding of how the offer making process goes. If you have any questions or would like to see a copy of our purchase agreement, please don’t hesitate to call or email me.

My direct line at the office is 1-800-401-1444.

My cell number is 248-736-6407.

And my email address is Jackie@JackieHawley.com

Search the MLS

Homes for Sale in Oakland County MI Homes for Sale in Clarkston MI Homes for Sale in Lake Orion MI Homes for Sale in Oxford MI Homes for Sale in Waterford MI Homes for Sale in Lapeer MI

www.MiRelocation.com

Preparing Your Home for Sale Why List With Me

Marketing Your Home

Choosing a Buyer’s Agent

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Seller Concessions Explained- Southeast Michigan Real Estate

This is my attempt at a very simplified explanation of what seller concessions are.

Example: You want to buy the house you just looked at and want to make an offer of $200,000. You need $5000 in seller concessions (seller paying all or part of your closing costs). Your offer will be $205,000 asking the seller to pay $5000 in concessions. If you offer $200K and ask for $5K in concessions, your offer is really $195,000.

The seller isn’t really paying your closing costs- you are mortgaging them.

Sellers- you really aren’t paying those closing costs. The buyer is mortgaging them.

Buyers- sellers have a bottom line. They don’t tend to come down to that bottom line AND pay concessions. The concessions are rolled into the purchase price.

Sellers– don’t question the amount of the concessions. If the buyer’s loan officer is over charging them that is their business. You only need to be concerned about your bottom line.

Cell: (248)736-6407

Jackie@JackieHawley.com

www.SearchMichiganMLSListings.com

www.OaklandCountyMichiganLakes.com

Waterford MI Lakefront Homes For Sale

Clarkston MI Lakefront Homes For Sale

Lake Orion/Oxford/Addison MI Lakefront Homes For Sale

Lapeer MI Lakefront Homes For Sale

www.LakeOaklandHomes.com

www.MacedayLake.com

Sylvan and Otter Lake

www.LakeOrionLakeFrontRealEstate.com

For Sellers- www.JHawleyAndAssoc.com

www.ClarkstonMichiganRealEstate.com

www.MiRelocation.com

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