Appraisals can make or break real estate investment deals. Right
now investors and home buyers are facing a sticky problem in
some areas. Skyrocketing home prices in hot areas are creating a
gap between the asking price on houses and the appraised value
of the property. Why? Because appraisers base their valuations
on past sales. They look at what comparable homes have sold for
over the past few months. In areas where home prices have been
climbing from 5% to 43% per MONTH appraisals often come in below
the contracted price. This can kill a deal, because the new
buyer will have to make up the difference between the contracted
price and the appraised value. Lenders base the amount they will
loan on a percentage of the appraised value. For example: A home
has a current value of $200,000 in a market that has appreciated
10% per month over the last few months. However, the comparable
sales over the months indicate to the appraiser that the home's
value is just $180,000. If the appraisal would come in at
$200,000 a lender would usually make a mortgage loan of 80% or
$160,000. That means the buyer would be required to make a
$40,000 down payment. But look what happens now. The buyer has
contracted to buy the home for $200,000, but the appraisal comes
in at just $180,000. Now the mortgage loan will be just $144,000
and the buyer will need a $56,000 down payment. That extra
$16,000 is often enough to kill a deal. What should you do as a
property seller in that environment? As an informed investor you
should always schedule a home appraisal during a period when you
can be there to talk to the appraiser. It's your responsibility
to point out to the appraiser any improvements, features or
additions that add value to the property. A skilled appraiser
will usually notice anything that might increase (or decrease) a
property's value.... but it's your job to make sure he or she
doesn't miss anything. Be sure to explain that the home is
especially well located for commuters, or the school district
shows a marked improvement, or a modern new shopping center has
recently opened nearby. Check with your Board of Realtors and
get the latest price appreciation figures for your area. In
other words... sell the value of the property to the appraiser
in any way you can. The time you spend doing that can payoff in
thousands of extra dollar. One more tip... in your sales
agreement include a
About the author:
Mark Walters is an investor-entrepreneur predicting a coming
wave of foreclosures. Learn his pre-foreclosure system here
http://www.pre-foreclosure.biz (Use this article only if you
make this an active link. Thanks)
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