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Your Guide to Selling a Home

Everything you need to know to buy a home without an agent.

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Appraisal

If the buyer is getting a loan, there is usually an appraisal involved in the process. This is to ensure the lender is secured in their monetary investment based on a third-party assessment of value.

Usually a buyer’s agent won’t tell you if it appraised for more than the sales price. But they will tell you “it appraised” meaning the buyer has no objection to the appraisal.

The appraisal came in lower than the sales price!

If the home doesn’t appraise to the sales price in the offer contract, there are a few things you can do as the seller. 

Does the purchase offer contain an appraisal gap coverage?

If so, the difference between the appraised value and the sales price may be covered by the buyer as per the contract. 

Is the appraisal wrong?

This does happen! As agents we will find errors in appraisals. The tough thing is that an appraiser tends to dislike being shown their own errors, and though they may correct an error – they may not adjust the price. This is a tough situation and takes some time and effort to pursue. Do you have solid comps to justify your position, and a justification for why the comps selected are way off base? Are there errors like these which we have found in the past:

  • Stated there was a pool and other community amenities, of which there were none (appraiser copy-pasted from a prior appraisal!)
  • Calculation errors such as subtracting value for an extra room instead of adding the value.
  • Wrong sqft entered (or other data entry issues)
  • Not accounting for legal or zoning restrictions impacting the value of a comp
  • Not addressing environmental issues or views, such as proximity to undesirable facilities such as a landfill, or views of the water or mountains.

Can you get a new appraisal? Yes, but this can be tough. Appraisers talk, data is shared, and noone likes to be proven wrong. The lender may not approve a new appraisal simply because the seller is not happy. Here you will want to have strong objective justifications and communicate without emotion. This is really important to be objective and factual and work based on knowledge, data, and facts. This is also a great example where a real estate agent is extremely helpful during a transaction.

Do you have a backup offer?

A great way to be empowered in your negotiations is if you have a backup offer in hand. Essentially your strategy is that if the buyer backs out, you would move forward with another offer. That can motivate a buyer to find a way to cover the difference, or help in your negotiations.

How do you negotiate now?

This will depend on the circumstances.

Is the buyer putting less than 20% down on the purchase, and probably doesn’t have any extra money to put down towards the gap between the appraised value and the sales price? If this is the case, you probably cannot negotiate much because the buyer will probably have to walk way if you do not bring down the price to match the sales price.

If you had multiple offers, you could state that market value is at the sales price and you have others still interested in the home if these buyers walk away.
Do note that any future buyer soon after will most probably have the same appraised value. If your home is for lower-income buyers, other buyers may not have extra money to bring to the table either to handle the gap between the appraisal and the sales price. Keep that in mind before rejecting a buyer who is almost to the closing table!

Is your home a luxury home? Or the buyer is buying a second home? You have more leverage knowing that the buyers probably could bring more money to the table to handle the difference.

Need help?

If you need help with negotiations, consider using a good real estate agent to help. This is where we offer an option to get agent-on-demand help – contact us today by calling Liz (970) 412-1020.

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