Real estate markets aren’t static. But, when a market is as “hot” as it is now in Woodland Hills, Calabasas & West Hills areas of the San Fernando Valley, it presents problems for homebuyers and sellers with appraisals.
When a lender’s appraiser visits your home, he or she will gather all the information needed to compare it to other homes that have recently sold to determine whether the lender should loan on the sales price or something lower.
This method is known by several names, most commonly, the Sales Comparison Approach or Market Data Approach.
For this method to produce reliable results, however, the market must be active, with enough recent sales of similar properties to use as “comparables.”
When a market is overactive, with home prices rising rapidly, such as the current market, problems also arise because there is a lag in the information. So sometimes the appraiser bases the value of your home on the slightly older sales.
The strongest indicators of current value are those comps which have closed within the past 90 days, according to the lending experts in Woodland Hills & Calabasas.
“Pending sales and listings are only used on the appraisal report to show what the current market is doing; appraisers do not consider these comps in their final opinion of value,” says a loan officer.
Here’s a common scenario
Joe and Janet listed their home, located in a desirable school district There was immediate buyer interest in the home and offers began rolling in.
A bidding war ensued, with anxious buyers offering more than list price in their attempts to win the home.
Joe and Janet were naturally thrilled. Until, that is, the appraisal results came in and the home didn’t appraise for the amount the chosen buyer offered.
When historical data lags the market’s reality, agreed-upon prices and appraised value often don’t match, Mark Johnson, president of LRES Corporation tells HousingWire.com’s Alex Roha.
According to The National Association of REALTORS®, more than one-fourth of offer prices are higher than the appraised value.
So, what is the solution?
One way to mitigate the challenges of a red-hot housing market is to get your ducks in a row before the appraisal.
Take stock of any upgrades and other improvements you’ve made to the home. Create an itemized list of them, the dates they were performed and by whom.
Put these in a file folder for your experienced realtor along with a short narrative of why a nearby home may have sold for less than it should have (if you are privy to this information).
For instance, if Mary down the street had to quickly get to a new city to take a job so she was willing to take a loss on the sale of her house, the appraiser should have this information.
Roja claims that “All appraisal experts were in agreement that a lack of communication is a breaking point for the expectations of what the home is worth in collateral.”
He goes on to state that, according to Joni Pilgrim, CEO of Nationwide Appraisal Network, “… 99% of the time, there are zero details about the subject property prior to the appraisal.”
Don’t leave the discovery of the details of your home to chance. Ensure you select an experienced, local realtor who can provide the appraiser with specifics on all the positives about the home and include their market knowledge.
If all else fails
If the appraisal of your home comes in lower than the agreed-upon price, the buyers can challenge the appraisal.
The buyers’ real estate agent will do most of the work here, including putting together a list of more recent comparable properties, a copy of everything in the folder you left for the appraiser and anything else that might justify the price the buyer offered.
Fiery real estate markets such as what we’re experiencing are a dream come true for sellers, unless prices are rising so fast that the market can’t keep up.
For a free consultation about selling your family home in Woodland Hills, Calabasas or West Hills CA please call (818)570-1144 email [email protected] or watch my videos on https://janeybishop.video/Empty-Nest-Downsizing-Playlist
