Buying or selling a home today is much more complicated than it was a few months ago – well, we all know that, don’t we? Often overlooked is the importance of the bank appraisal process. A real estate agent should give the bank appraisal the same attention and preparation as is done when formulating a marketing plan for selling a home. It’s one of the most important steps in the selling and buying process – without a satisfactory appraisal the bank will not grant a mortgage.
To help understand the process and requirements in today’s market, Thomas E. Lauritano, a NYS Certified Appraiser of Lauritano Appraisal Services, recently met with the agents in my office to discuss the new guidelines and to answer our questions. Tom’s company provides appraisals and is a consultant to one of the largest mortgage banks in the area. He elaborated on procedures that I have followed for years when meeting an appraiser. He stressed the importance of analyzing the data and explaining why certain comparable sales were chosen as relates to the subject property and the neighborhood values. Optimally, banks want comparables that are of homes within the neighborhood and that have closed within 6 months. Realistically, such comparables are not always available. If there are no recent comparable sales in the immediate vicinity of the subject home, you’d better be prepared to fully justify the ones that you do choose.
If a house nearby sold for less, then that must be explained in detail. What was the reason? Family member purchased home? Foreclosure or Short Sale? A handy-man special? Sometimes, agents just choose to ignore those houses – hoping the appraiser won’t “bring it up.” That won’t fly in today’s market. In addition to the sold comparables, he stated that banks and underwriters currently are asking for the pending sale prices of homes that recently entered into contract. Data from these sales generally are requested from the brokers involved in the sales. Pending sale prices are the best indication of where the market is now and if it is holding steady, declining or rising.
Just handing an appraiser some listings, without an analysis of each one and detailing why it is a good “comparable” for the subject home may result in a low appraisal and a “deal” falling through. If the underwriter refers it back for further explanation, the appraiser must be prepared to defend his report. There’s no guarantee that the appraiser or the underwriter will accept your agent’s analysis. However, if the agent hasn’t supplied sufficient data to begin with then the analytical report may not be as detailed as it could have been.
When selecting a REALTOR©, you should choose someone: 1) Who has the experience and expertise to handle all the aspects of the home buying/selling process; 2) Who understands the appraisal process, knows which data to select and what details to provide to enable the appraiser to provide a full analytical report that will meet the bank’s requirements; and 3) Who is an expert in the local real estate market.
Any questions? Please call me at 631-549-1993.