Appraisals – A Critical Part of the Transaction

When a buyer takes out a mortgage, or when a homeowner refinances their home, the lending bank or entity will conduct an appraisal to verify the market value of the home. This protects the bank’s interest in the home and helps verify the percentage of equity the buyer or homeowner has or will have in the property.
It is important to know that when a buyer and seller agree on a price for a home, the appraisal may not reflect that same price. Especially in areas where prices have appreciated rapidly, it may be difficult for the appraiser to find comparable properties that have changed hands in the last three months which can help guide pricing on the current property. For example, say there were two comparable properties that sold four and six months ago in the area and in the last year, sale prices have gone up 15%. That means those two comparable properties may have sold for 5%-7.5% less than the property that is being appraised and the appraisal could be lower than the buyer and seller expect.
This is especially problematic in a transaction for two reasons:
1. The appraisal represents the maximum the lender will lend on the property. So if an appraisal comes in at $300,000, the buyer and seller have already agreed on a price of $340,000, and the buyer is taking out a loan with 10% down, obviously the math no longer works. Depending on the agreement between the lender and the buyer, the lender may not be willing to loan more than 90% which would mean the agreed-upon price would need to be lowered or the buyer may need to put more money down.
2. In the event the buyer is putting 20% down to avoid private mortgage insurance (PMI) (typically required when buyers or homeowners have less than 20% equity in the property) and the appraisal comes in low, then there is the potential problem of the buyer no longer having that 20% because some of the reserves may be used to make up the difference in the appraisal as in the following example:

• Agreed upon-price: $350,000
• Buyer is putting 20% down: $70,000
• Appraisal: $300,000
• Buyers and sellers renegotiate on price: $325,000
• Seller comes down by $25,000, buyer uses $25,000 of their $70,000 to make up the difference leaving them with $45,000 down payment which is only 15% of the loan, thus causing PMI to be assessed each month.

The bank may determine that the buyers have too many other monthly expenses to afford the PMI and denies the loan.
According to the National Association of REALTORS, in April of 2016, 12% of terminated sales failed due to appraisal issues which also led to delayed closings (28% of closings that were delayed were delayed due to appraisal problems). This is good information for you to know if you are a buyer or a seller, but rest assured I have tools for working with appraisals should the need arise. Please give me a call, text or email: (253) 222-2626 or john@altitude-re.com

Short-Term Housing Options – Successful Home Selling and Buying
If you are one of the millions of homeowners across the country with equity in their homes, congratulations! If you take a look around and realize your home no longer suits your needs, you may be thinking that a move is in your future. However, many areas around the country are currently experiencing a shortage of homes for sale, resulting in multiple buyers competing for the same property. Gridlock ensues with sellers reticent to put their homes on the market, concerned that they may not be able to buy their next property before they need to move out of their current one.
However, this problem can be solved with a little creative thinking and can actually spell opportunity for you in the end! In a multiple offer situation, sellers prefer offers without a contingency requiring that the sale of your current home be completed before the new home sale is complete. Therefore, if you can complete your home sale before you make an offer on your next property, you will be in a very strong offer position.
So where will you live between the time you sell and close on your new home? There are a number of options to consider:

1. Rent back your current home: Although this is something that you will need to negotiate into the purchase and sale agreement when you sell your home, renting back for a few weeks may be an option.
2. Stay with family or friends: Putting your belongings into storage and staying with family and friends can be a great short-term option. If you are considering this option, I recommend having a planning meeting with your short-term “landlord” to determine fair rent including utilities, and discuss how day-to-day living will commence. What is the bathroom schedule? How will food be supplied and tracked? Who does the dishes? Setting up expectations is the key to remaining friends after you move out. Agreements prevent disagreements.
3. Consider a vacation rental: Since many traditional apartment and homes rentals require a year or more lease, consider a vacation rental instead. Homes, condos, townhouses and even boats are available to rent for different durations. Why not take the opportunity to test living somewhere in town that you have always wanted to try? Furthermore, if you have a pet, you may be more likely to find that vacation rentals are more pet-friendly than their long-term counterparts. Check websites such as VRBO.com, AirBNB.com, and HomeAway.com for short-term rentals in your area.
4. Corporate housing: If you work for a company that provides housing to mobile or relocating employees, they may have housing available for you. Check with your company’s relocation department. Alternatively, companies who provide this kind of housing to businesses may have a solution for you.

Yes, you will need to store your belongings temporarily, but in the end you can take your time and eliminate the stress that timing brings. In my experience, it is well worth it! Contact me to learn more: john@altitude-re.com or (253) 222-2626.

Sorry for the boring video, but it is the easiest way I know to convey that we have LOW INVENTORY!!! If you’re thinking of selling your home, now might be the time! Prices are up and inventory is super low! Buyers are almost begging to be the one to buy your home! Check out the stats and give me a call, text or an e-mail.  Thanks!

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The video above gives you a good national perspective. Here’s how the stats break out for the three county area (Pierce, Thurston and King County).

In Pierce county we closed out 2015 selling 13,273 homes, that’s up from 11,307 in 2014, a 15%. Pierce county finished the year with 2,001 Active listings compared to 2,752 active listings in 2014, a 27% DECREASE. So when you combine more homes selling with fewer homes on the market, that means we have LOW INVENTORY!! In addition, days on market decreased to 91 versus 96 in 2014. The telling stat too is that our average sold price is up from $257,555 in 2014 to $277,815 in 2015! A 7.8% Increase in home values! We’re back baby!!

King County has a fitting title as the King of Washington when it comes to home value and inventory stats! King county ended the year with 26,693 sold homes up from 24,393 in 2014, an 8.7% increase. Active listings decreased from 2,758 to 1,764, a 36% decrease! The average home price in King Co. increased from $542,225 to $585,982, a 7.5% increase. So while technically Pierce county outpaced appreciation in King County, King County gained more equity.

Thurston County sold 4,115 homes compared to 3,501 in 2014, a 15% increase. Active listings decreased form 980 to 790, a 19% decrease. Home prices increased from $255,414 to $260,020, a 2% increase. While Thurston county didn’t have a huge run up in prices like Pierce and King counties, bear in mind they didn’t have it during the housing boom either, and they never had the huge crash those counties had during the downturn. They’ve been pretty steady all throughout the past decade.

Did I mention we have LOW INVENTORY!! If you’re thinking about selling, NOW IS THE TIME!! Call me for a no obligation market analysis!  253-222-2626

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