Well, actually, that was lesson #3 learned from my listing at 1697 Walleye Dr.
Lesson # 1 - The Internet IS a source of business for real estate agents. This listing came to me directly through an ActiveRain contact form for a property located about 3 blocks from my office, in the heart of my target area in Crofton, MD.
Lesson # 2 - Do not walk away from any listing, even if it is overpriced. I did at first, but had second thoughts as I drove down the street. The next morning I called the home owner and said "If anyone can sell your property for more than $300,000, I can." Over the next few weeks, I had several sign calls on that property, ending up with at least one other listing and sale.
Lesson #3 - Appraisals are not the last word! We did get a full price offer of $333,000 about 30 days later. Concerned about the appraisal, I asked the seller to provide her receipts for renovations, which I then gave to the appraiser. In spite of documentation for more than $50,000 of renovations, the appraisal came in at $295,000, just $11,000 more than she paid for the property in October 2006.
The mortgage lender, new ActiveRainer Don Wilkins, immediately ordered a second appraisal. Again, I met the appraiser and gave him the package of receipts. This time, the appraisal came in at $306,000 - better, of course, but still $27,000 away from the contract price. Many agents and lenders would have let the appraiser have the last word and this sale would have died at this point.
But not me, not us... Super-heroine Margaret, along with the super-hero co-op agent, informed our respective clients of the situation and asked how they felt about going forward (without mentioning our own doubts). My client said she would consider it, if the buyers could/would waive the closing help in the original contract. The buyers told their agent that they would waive the closing help in the original contract, if the seller would accept the sale price. Voila! They came together on their own, and they both feel they "won" because the solution was THEIR OWN IDEA.
The buyer and seller reached a fair compromise, facilitated by two experienced agents and a lender willing to seek a second appraisal. They, not the appraiser, got the last word. Settlement will be next week, and all are expected to live happily ever after!
Remember Margaret in Maryland for real estate in the D.C.-Baltimore-Washington triangle.
Copyright 2006-12. All rights reserved.
DISCLAIMER: Information contained in this post is deemed reliable on the date of publication, but it is not guaranteed and it is subject to change without notice.
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Margaret Woda, REALTOR and Associate Broker
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Long & Foster Real Estate, Inc., 2191 Defense Hwy., Crofton, MD 21114 (410) 721-1500
Margaret
There are several wonderful messages in this post concerning the innate wisdom of clients and the art of negotiation. The key is to leave a door open for people to reach an accord.
The true value of the property is...what the buyer is willing to pay for it!! Appraisals can be so subjective, and really only an educated guess based on recent comps. But they don't tell the whole story, especially if the market starts to turn around. The buyers have probably been to many homes before choosing this one and they made an offer based on what they've seen and what they felt was the best price. Who are we to argue with that?
Great post!
Ed - Thanks for seeing the "other" lessons - I didn't realize, until I wrote this, what a good case study this property has been for me.
Ruth Ann and Henry, Jim and Maria - Yes, I do think appraisers are being very cautious. In this case, both appraisals were generous if they considered only the comps. We were fortunate that the second one gave a little more weight to the renovations, documented by receipts.
Kelly - Willing buyer + willing seller = Appraisal at contract price... works for me!
As always, I really appreciate your comments.
Great job Margaret!
Katie - Great to see you on ActiveRain. Thanks for the comment. (Katie was first my client, then my assistant, many years ago before she relocated to Delaware)
Jim - Thanks for the compliment. I hope this posting helps a newer agent, or two or three, to have an idea of how to deal with this situation.
Margaret,
I am glad your deal worked out. As an appraiser believe me we don't ever have the last word. Value is ALWAYS the price someone is willing to pay. Appraisers, we're not number-hitters. That's not why our clients, like you, hire us. You hire us to be candid, professional and independent.
Appraisers serve a valuable purpose within the real estate transaction. They protect the lenders from lending too much money and they protect buyers from paying too much for a home."
Sellers, and Lenders may WISH that "Market Value" appraisals represent the highest price a home will bring in an open market but that is not what the definition of market value provides for
an appraisal is "an opinion" of "market value"... one person's opinion of what the value of a property will be in the open market. Difference is, appraisers do not take into account many factors that truly do affect value. They are limited in scope, and because of this they do not always give an accurate assessment of true value.
The facts are that USPAP clearly states that market value appraisals should be based on the "most probable price" and NOT the "highest price" a property might bring in an open market.
That's really the role of any appraiser in the mortgage market: We're like auditors are for publicly traded companies. During the recent historic mortgage and housing boom, too many of our colleagues fell into the trap of "working the numbers."
we're here to help you make a responsible, fully informed decision on whether to make a loan, and for how much. We can't provide a more important service to any of our clients than to sometimes say "no," you're taking too much risk if you make the loan you're being asked to make.
Confidence - your confidence in us, and your borrowers' confidence in you,- that's what the appraisal profession brings to the mortgage process. And that's what we strive to bring you every single time you engage our services.
Don - I wondered if I would hear from any appraisers... Thanks for weighing in. Please be reassured that this is more about how we agents deal with low appraisals than a critique of the appraisal process. It's very easy for us to sulk off and assume the buyers and sellers will never come together, and therefore the transaction dies - but this case proved (again) that good things can come, if we agents hang in there after a low appraisal and facilitate a solution.
Gwen - Thank you for your comment. It sounds like your parties reached the same type of compromise that mine did. Helping to bring that about does feel good, doesn't it?
Sybil - Hi, thanks for visiting my blog and thanks for the comment.
Hello Margaret,
Good job! You are right so many Agent would have said well that's it but then there are "excellent" Agents like you who work so hard for their clients. I commend you and all involved to coming to an agreement that proved to be a Win/Win.
Don, thank you for your professional post about an appraiser's role and duty.
I had appraisals explained to me this way:
Market Value Appraisal - Probably price a buyer would pay today, see Don's post above.
Mortgage Appraisal - Long term conservative estimate of market value.
Assessed Value Appraisal - Value as a specific date (previous July 1 in our area) used for tax purposes.
Best Use Appraisal - Similar to Market Value but taking into consideration what use the property can be used for under current zoning. Often applied to commercial properties, tear downs or zoning changes.
Each of these appraisals serves a different purpose. A seller wants the highest Market Value and lowest Assessed Value. A Buyer wants the lowest Market and Assessed Values, but highest Mortgage Value. These numbers can be quite different.
Great post and job well done.
Lesson #3
Sorry, I am an appraiser and have a different perspective. Reading the story, I believe you did use the second appraiser's sale price, not the original contract price.
I do not want to rain on your successful story, you should be proud for making the situation work. However, I do think if had informations on sales and listings that supported the sales price, that might have been more effective than a laundry list of improvments. Market value concerns the typical buyer and seller. Sounds like you understood this was a possible issue all along.
The Most Common Definition of Market Value for Real Estate:
The most probable price that a property should bring (will sell for) in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised; (3) a reasonable time is allowed for exposure to the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Great story! I love hearing about transactions working well for both parties.