As we mentioned before, despite many challenges in the market, nearly all of them are able to be overcome!
Okay, here we go for challenge #2!
Low Appraisals -
The Challenge – Yes, we all know that prices are dropping. But what some of us don’t know is why. Well right now, there are lots of what we call distressed (foreclosed) properties on the market. These properties typically sell for less than market value. But when a distressed property sells, it then becomes a comparable for the other houses like it, in the same neighborhood, or neighboring neighborhoods (what a tongue twister)!
Along with a load of distressed properties, there are also sellers who are in sticky situations either with having to move or who are in economic difficulty. These sellers are also more likely to sell for less just to get out from under their home.
Third, it isn’t just distressed properties or short sales, it’s also home owner’s who have a lot of equity and can afford to pull their price down. The current average time it takes to sell a home on the Hampton Roads Peninsula is approximately 109 days. The average home owner isn't accustomed to this kind of time frame, so after 30 days or so, they start getting anxious and start dropping the price. And if/when they do get a offer, they are so anxious to move they are willing to come down on the price even more!
The principles of real estate tell us that a home is only worth what other houses like it are worth. And worth is determined by previous sales. So therefore, the value on your home goes down due to the “market”, which inevitably means that because houses around you are selling for less, then your house is worth less. Frustrating I know! So the challenge is…even if you get an offer on your house that you are happy with, will the appraisal come in at that amount?
For those of you who have sold before, you know that the appraisal has to indicate that the house is worth the value of the buyer's loan. Obviously not an issue for those ideal cash buyers! If it comes in lower, then you (the seller) has to either drop the price or let them out of the contract and put your house back on the market.
The Solution – Stay on top of what is happening in your neighborhood. Be aware if there are several foreclosures on the market, or even motivated sellers. Once one of those houses gets bought, there isn’t a whole lot you can do to stop what that will do to your price. However, we feel that being informed of what’s going on in your neighborhood will help you make more informed decisions.
Finally, an important solution is to change your way of thinking. Look at the positive. If you’re selling, then hopefully you will get more for your money and a good deal when you are on the purchasing side of your next home!
We know that this situation can be the most frustrating of them all….you finally find a buyer who is willing to pay an agreed upon price and someone else tells you that your house isn’t worth it. But the appraisal process is an important one and not one that is going to change any time soon.
So repeat after me…. “God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”
Feel free to comment and share your expertise and experience!
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