|
KAUAI REAL ESTATE APPRAISALS
By Carol C. Cummings R/CRS/GRI/SRES - Kauai Realty, Inc.
In these changing times of a “correcting” Kaua`i real estate market, how does the appraisal affect a sale?
Most of the offers to buy real estate include contingencies, or conditions that must be met before the sale can close. One of the most common contingencies is the financing contingency, which basically states that the transaction is subject to the Buyer’s ability to qualify for and obtain financing. Often, the Buyer’s loan proceeds are subject to the property being appraised at least at purchase price. Therefore, the appraisal is a critical component that can “make or break” any escrow.
It is important to understand the role of the appraiser in the real estate transaction.
The appraiser is a trained professional hired by the lending institution to provide information to confirm that the subject property is valued at a minimum of what the Purchaser (Borrower) is paying for it. In most cases, the Appraiser is required to use data from 3 recent sales (preferably within the last 6 months) of comparable properties, to determine the value of the subject property. The appraiser is required to be unbiased and realistic about the actual value of the property. Appraisals are subject to review, much like an audit.
In a stable market, there is enough data to support purchase prices.
However, when prices are on the rise, sales that closed a few months ago may not support current numbers. On the other hand, when prices are dropping, the appraiser must adjust his/her appraisal to project the current trends, and today’s appraised value will be less than it would have been in healthier economic times.
What can be done by the seller’s agent before determining an asking price?
Your properly trained agent should be able to provide you with a “Comparative Market Analysis”, which will give you a realistic market value of your property. If properly calculated, the Realtor’s market value should be very close to what you can expect the appraised value might be.
What can be done when a property looks like it will not appraise?
The cooperation of the appraiser, lender, and real estate professional can put forth positive results:
“Assist with a smile.”
The Realtor may be able to provide the appraiser with additional information of sales that the appraiser may not be aware of, such a pending sales, or recent closings.
“Stall is good.”
If the appraiser knows there is a pending sale that will help the value of the subject property, he/she may wait for this comparable sale to close before completing the appraisal.
“Subject to.”
In rare cases, the Appraiser may use data from a property in escrow, noting that the appraisal figure is subject to the closing of the comparable property. If the lender is agreeable to accept the information, the loan processing can proceed, subject to confirming the sale of the “comp”.
If the property does not appraise at purchase price, what can be done to make up for the low appraisal?
“Got cash?”
The Buyer may opt to make up the difference between sale price and appraised value with additional cash. Example: Buyer is applying for an 80% loan. Purchase price is $515,000. Appraised value is $500,000. Buyer will place a cash down payment of $115,000 instead of $100,000.
“Let’s make a deal.”
Once in a while the Seller may be open to renegotiate the sale price if other options have been exhausted. The Seller may recognize that the Buyer is a strong purchaser, can close quickly, rather than canceling the sale and remarketing the property.
This brings us to a closing thought…
Mr. Seller can “ask for the moon and shoot for the stars” when determining a sale price. However, if the property does not appraise, the deal may be “stuck in the sand”!
|
