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Archive for the ‘Foreclosures’ Category

Am I Overpaying? Is the listing overpriced? What is the house worth?

All questions, or variations of questions, most buyers ask when buying a house. They are valid questions with not easy or pat answer. The value of the home depends on your point of view.

Webster defines “value” as “a fair return or equivalent in goods, services, or money for something exchanged” or “the monetary worth of something.”

Out of everything that is currently on the market: Is it the best house for you, with an asking price you would be comfortable paying? If you were assured the asking price is fair, would you feel like you were settling with this particular house? If the house is everything you were hoping for in your price range, then you’re not overpaying.

Websters defines “market value” as “a price at which both  buyers and sellers are willing to do business.”

Now that doesn’t mean it will appraise. Appraisals are usually needed to get a mortgage.

My definition of “appraised value” is “a price determined by a licensed appraiser who is following both government and lender guidelines.”

Some of the rules appraisers have to follow for most residential loans, that can and do affect “value” are (among others):

  • they are limited on the amount of value they can give outbuildings
  • they are limited on the amount of value they can give to land when buying a home on acreage
  • they are limited on the amount of value they can give for upgrades such as top of the line windows, 50 year warranted roof, finished basements, crown molding, upgraded cabinets, flooring, light or plumbing fixtures…..

Other factors that can affect the appraised value are the lack of comparable sales. If you are selling a custom lakefront home on a lake that has had mostly cheap foreclosure sales, converted cottages, the appraisal could come in low. Especially if the house is on one of the more desirable lakes- the sold comps for more custom homes may come from a less desirable lake and there’s really no way to adjust value for the lake.

If you are buying a house with a hundred thousand dollar indoor arena and another fifty thousand in oak fencing and 20 acres, the lender expects the seller to give little to no value to the barns, fencing and land.

Do these things have value to the consumer? Are there things about the house you want, that have value to you, that an appraiser may not consider? If so, are you able and prepared to pay the difference if the appraisal comes in below the agreed upon sale price?

If you are unable to pay the difference between appraised value and what the seller is willing to sell for, then we would need to determine an approximate value an appraiser would come in at and not exceed that price in negotiations.

If you are able to pay the difference, you need to decide what the value of a particular house is for you. Basing your purchase solely on appraised value can cost you more in the long run.

Making the Offer

All About Financing

The Home Inspection

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Jackie Hawley
ReMax Encore, Clarkston MI

Cell: (248) 73606407

Email: Jackie@JackieHawley.com  

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What Happens if the Appraisal is Low?

Low appraisals (appraised value coming in lower than the agreed upon sale price) are becoming more common and will probably remain a problem for quite awhile to come. There are many reasons why appraisals can come in low, and it is usually NOT because the buyer was prepared to “over pay” for the house.

I used to define the word “appraisal” as an opinion of value. Back in the day the loan officer got to choose the appraiser; an appraiser on that lender’s approved list of appraisers. Most of the time a local appraiser was used, and appraisals were usually pretty accurate. In fact- contrary to recent pundit opinion– many appraisals tended to come in lower than they should have. Most of the time, the appraiser would justify the sale price, even if the buyer was buying the house at a bargain price.

Today I define the word “appraisal” as an opinion of value derived from data that fits a particular lender’s criteria. Also, because of fairly recent legislation (over the past couple years) the choice of the appraiser is taken away from the lender, and I have been seeing a lot of out of the area appraisers on my listings and when representing the buyer. On a recent purchase my buyers ended up paying for 2 appraisals- both licensed appraisers, both appraisals were within a week of each other- one came in at $300,000 and one came in at $362,000.

Buyers and sellers both want the house to appraise. Buyers are represented now ‘days, and their agent should advise them if they are over paying. Buyers are more savvy and educated than in the past, and by the time they make an offer they know what a house is worth. But the appraisal is usually needed to obtain a mortgage.

So what happens when the appraisal comes in low?

  • The seller can come down in price to match the appraised value
  • The buyer can pony up the difference
  • The buyer and seller can settle somewhere in between
  • The buyer can back out and the house go back on the market

The above scenarios assume the purchase agreement stipulates the house must appraise for at least the sale price. The purchase agreement I use lets the appraised value become part of the negotiations. For example the buyer may offer to pay $200,000 for a house but is contingent on the appraiser coming in no lower than $190,000. This can be very useful in a multiple offer situation.

There is no law that forces a seller to come down in price, just like there’s no law that forces the buyer to go through with the purchase if the appraisal is low. Some sellers can’t come down any farther and sometimes the buyer just isn’t able to pay the difference. This can be a real problem when seller concessions are needed.

Bottom line is: appraisals come in low way too often and there is no right or wrong way to resolve the problem. BUT don’t assume the seller will automatically come down in price because a third party doesn’t agree with the buyer or seller on the value of the home.

If You Work As My Buyers Agent How Much Does That Cost Me?

How Not to Buy a House

All About Short Sales and Why a Short Sale May be Wrong for You

Search the MLS

Jackie Hawley
ReMax Encore, Clarkston MI
cell: (248)736-6407
Jackie@JackieHawley.com
www.MiRelocation.com

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If You Work As My Buyer’s Agent, How Much Does That Cost Me?

how buyers agent gets paidAbsolutely nothing– in the majority of cases. First let me explain HOW I get paid before I get into the few times where I will ask the buyer to pay me or contribute towards my pay.

How most real estate agents in North Oakland and Lapeer County get paid:

The listing agent charges the seller a commission when they list their house. The listing broker then offers a cut of that commission to a buyer’s agent if they bring a buyer and the sale closes. There is no set amount that brokers or agents charge and there’s no rule on how much they have to offer a buyer’s agent. I personally charge my sellers 6% and offer 3% to the buyer’s agent. On vacant land I normally charge 10% and pay 5% to the buyer’s agent. On lower priced sales I have a dollar minimum. There have been times when I’ve increased my commission to either pay more to a buyer’s agent or for additional marketing or because the sale is just going to be a pain in the ass. But that is a good topic for a future post.

Long and the short- listing agent pays buyer’s agent most of the time.

Sometimes the listing agent pays less than what I find an acceptable fee and in those few cases I mayhow a buyers agent gets paid ask the buyer to negotiate the difference between what the buyer’s agent is offering and 3% – the same fee I charge sellers for the listing side of a sale. Or for the buyer to pay the difference. 

For example: If the listing agent is offering a “co-op” of 2% I will ask you to negotiate a 1% buyer agent fee to be paid by the seller or ask you to pay the 1% directly to my broker. That fee would show on the HUD (settlement statement at closing).

 

So in a nutshell: Most of the time I get paid by the listing agent. On rare occasion I will ask the buyer to contribute.

 

Why You Should Hire Jackie Hawley as Your Buyer’s Agent

Do You Really Want to Buy a Short Sale?

Search the MLS

Seller Concessions Explained

How to Calculate Your New Property Taxes

Jackie Hawley
Keller Williams Realty
cell: (248)736-6407
Jackie@JackieHawley.com
www.MiRelocation.com

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