Don’t underestimate power of preapproval, local appraiser
Home-sale problems usually derive from three sources: property inspections, the buyer’s financing, or the appraisal of the property. Any one of these can crater a deal. Being proactive is the secret to avoiding problems, if possible.
It can’t be emphasized too much how important it is to have the property fully inspected by qualified local inspectors. Check the permit history and ask the sellers for answers to any questions you have.
Along with this, sellers should disclose what they know about the property that might impact a buyer’s decision to buy or the price she’d pay, even if not required to do so by law. State disclosure laws vary from one state to the next.
Sellers who fear that telling all will keep their home from selling should consider the consequences of concealing something negative, like a leaky roof or a basement that floods when it rains. Withholding information and getting sued later is likely to be far more costly and time consuming than coming clean even if you have to make a price concession to compensate the buyer for defects she’ll need to repair.
Low appraisals have been plaguing the home-sale industry for a few years. One issue is the lack of comparable sales. Another is that prices have declined in most areas since 2007. As a result, many homes appraise for a price that’s lower than the amount of the loans secured against the property. This can turn a conventional sale into a short sale that takes time and can be difficult because the sale requires lender approval.
HOUSE HUNTING TIP: It’s a good idea for both buyers and sellers to study the recent comparable sales for the home in question. Discuss the comparables with your agent and make sure you have comparables ready for the appraiser or buyer’s agent before the appraiser inspects the property. Some appraisers are from out of area and don’t know the local market.
Sellers should consider not selling if there aren’t comparable sales to support the price they want. A seller can hope for an all-cash buyer, but even all-cash buyers often want the home to appraise for the contract price.
If the contract includes an appraisal contingency, the buyer can withdraw from the contract without penalty if the appraisal comes in low. Sellers who choose to go ahead and market their home at a high price should be prepared to negotiate the price with the buyer if the appraisal is low.
Before making an offer to buy a home, talk to your mortgage broker or loan agent and find out what you can afford. Lenders’ qualifying guidelines have become more rigorous in recent years, and they are about to tighten further. Be candid with your mortgage originator so that there are no last-minute surprises.
It’s best to get preapproved for the mortgage you’ll need before you make an offer. This will help in your negotiations with the sellers. It will increase their comfort level about your ability to actually close the transaction.
Preapproval involves having your loan package reviewed by a lender’s underwriter. This means that you’ll have to assemble all the paperwork the lender requires. Be prepared to provide even more than you could possibly have imagined would be necessary.
You can avoid problems by using an experienced local agent who comes highly recommended. Local agents are aware of local problems, such as slide areas, that might not be known to an out-of-area agent. Set your standards high and expect the best.
THE CLOSING: Residential purchase contracts need to be in writing to be binding. If any changes are made during the transaction, they should be in the form of a written addendum to the contract signed by both buyer and seller.
Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer’s Guide."
|Contact Dian Hymer:|
|Letter to the Editor|