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Speaking from an Appraiser's point of view. First have your BRAG sheet on the home including Costs and give to Appraiser or put in the home for them with your other Comp data. If you meet the Appraiser be right up front and say this one does not have an abundance of comps that compare in the area, but show them how you arrived at your listing price. I agree with one person here, tell Appraiser you had several offers close to listing price. I assume your Days on market is low, that is also a good indicator that the market is more than willing to pay the price for this home. If you need to leave a packet in the house if Appraiser is not meeting with you, do that now and just put note in there to Appraiser stating here is some information for you because you know the comps are limited and you know that the Appraiser would wonder how you came up with your listing price. Then also state you would be more than happy to answer any questions they have as they are working the report. If you meet the Appraiser do not hover...Just say you knew this one would be unique and you thought you would show how you came to your listing price. If the Appraiser knows there were several offers and the days on market are low, you may be just fine. Good luck
Red Bank, NJ
Make an informational flyer that lists all the upgrades and the cost of the upgrade. Make a display and have an extra copy of the flyer for the appraiser. This is a tool for your appraiser to help you get the home appraised.
San Diego, CA
Pacific Grove, CA
See if the buyers will pay over if it does not appraise. Sounds like with multiple offers you may find one that will agree to this.
If all cash is out of the question - the next best option is to counter all offers with a sale requiring 35% down as a minimum...then if it doesn't appraise the loan will still be put forward...as loan to value is no longer an issue.
San Diego, CA
Ask one of the good offers to waive "appraisal" contingency. The lender only cares if it appraises for more than the loan amout. Surely it will be within 20% down payment. Or of course all cash.
Pacific Grove, CA
Are any of the offers cash? If not, maybe consider removing the keysafe after inspections, that way the appraiser has to call or meet you at the property. Something I do a lot, and then have a nice conversation about comps, this unique property, etc. The only other thing you can and should do is have that conversation with your clients, the sellers now. Dont want for the apprasial to come back low and then tell them "I was worried about that." If none of the offers are cash, it is a bridge you must cross. Good luck.
John McCormack, CRS
Lot's of great comments and useful information to be prepared for appraisal shortfalls. However, I question Frederic & Jill's comment about making sure the appraiser knows the local area. As Synthia stated, ... I don't know of a way that I can have any input on which appraiser the lender uses ... ????
Because you have multiple offers, consider issuing a seller multiple counter offer which includes removal of the appraisal contingency for financed offers.
When you meet with the appraiser (you should always meet the appraiser), make sure they are aware you had multiple offers on the property. It says the market believes the property is worth the price.
Offer to assist the appraiser in obtaining any needed information, though you should anticipate the appraiser's needs and be prepared.
Sellers should always be advised that there can be appraisal issues and that you'll do all you can to minimize or remove the risk of an appraisal defict.
When the appraisal appointment is being made, make certain the appraiser knows the area and isn't from two counties over with no knowledge of what makes the location and features of your listing desirable.
Look for cash offer or significant downpayment and offer not contingent on appraisal. Also, find the best comps that you can then really analyze the heck out of them with plusses and minuses. Go outside the city if you have to and justify it. Do this all before the appraiser comes so you are not racing last minute and have ample time to prepare.
Look for a cash buyer that doesn't care about the appraisal and have them sign off on that decision.
Prepare your seller for the possibility that it won't appraise at the sales price and discuss the options. I would also accept the offer that is most likely to close instead of the highest price.
Corpus Christi, TX
Knowing this in advance, it was your responsibility as the listing agent, to advise your seller regarding the appraisal consequences and have the owner choose whether to remove this issue at part of the negotiations. Get the bank out of the picture and a negotiated element of the purchase agreement.
The seller did not hire you to employ the cross your fingers and toes strategy. You were hired to ensure the offer with the highest likelihood of closing. Now, you need to 'justify' the negotiated price using the tangible assets of the house without violating the rules of engagement regarding the appraiser..
If you are unable to justify the negotiated price to the appraiser, be prepared to give your seller a $30,000 price beat down delivered by the bank.
It is doable, and I did it last month, but YOU have to make it happen and will not involve wishing and hoping and praying and certainly not crossing your fingers.
Make sure you know the lender is using appraisers with deep local knowledge of your market. Also when considering the offers you receive pay close attention to downpayment proposed and financing type as some offers will be less sensitive to the possibility of an appraisal coming in below contract price.
Last but not least try to learn about the buyers, a local buyer is more likely to stick with the price offered as they are more likely aware of the marketplace and understand that the appraisal might come in lower.
I would have back up on how I came up with my price, and if it is unique that you could put that in your back up.
Cross your fingers and toes...
Synthia Noble Since your listing is unique, the appraiser should take this into consideration. The appraiser may also do the cost approach method if there aren't any comps with similar characteristics. As Jeff Pearl said, take the strongest offer and see how it appraises.
Are any of the offers not contingent on appraisal? Pick the strongest offer, and maybe someone has enough cash in bank that is willing to pay more than appraised value if it comes back low.
If it doesn't appraise it doesn't. All you can do is try. How did you come up with the listing price?
Take the cash offer.
Ask for appraisal contingency waiver.
Perhaps a pre-listing appraisal would have been helpful?
Do the best you can and when the appraiser comes provide him with comps that will help him arrive at the price. You can also make the accepted offer not subject to appraisal.
Mary Thompson's advice seems great. Comps are the best indicators of price and for unique properties without comps, we have to try to come up with all the things that the seller may have done to boost the house's value. Great question, Synthia Noble and good luck with the house's appraisal.
Yes... say a prayer and HOPE your buyer has a lot of cash to put down with the offer or your seller agrees to a more realistic price
Are there offers that are all cash or have a large down payment?
Meet the Appraiser in person and be sure to provide the Appraiser with all of the upgrades and features that the home has, along with showing him/her how you arrived at the list price.
Hopefully out of all your multiple offers, there is one that stands out to be the strongest.
Make sure you communicate with your client so that they are aware of what is happening with the transaction. Communication is key!
Pick the offer, where the buyers are most willing & able to make up most of the difference, if the appraisal comes in low. Attend the appraisal, so you can point out differences in this property versus others, so that the appraisal may become a non-issue. Best of luck.
You've gotten a lot of good input here. I especially like hearing from the appraisers in the crowd and reading their refreshing attitudes.
Back when I was an agent, our local appraisers thought of themselves as gods - there's no way they'd have accepted information from a lowly agent. (Except, of course, when they'd call to get information on a property they were using for comps for someone else's transaction.)
I recall one in particular who called me often. One day when I was working on a broker price opinion I called him for advice. He said "Any advice I give you will be worth what you pay for it." After that I didn't take his calls when he wanted information.
Good luck. I just closed one $50k over last highest sale. Prove it's value. We had to do two appraisals.
Mary Thompson, I would love to work with you as an Appraiser!! Actually, many are pretty great; but I've dealt with a few, one in particular, that wouldn't talk to me and said, "I'm not supposed to even be talking to you and drove away." Yikes!! Btw, she didn't appraise the house!
I guess waive Appraisal Contingency, Cash Offer or Lots of money down payment!
Take only a cash offer and have the buyer sign something that states they agree to the negotiated price regardless of the appraised value, if they choose to have an appraisal completed. I also like Steve Loynd's approach.
A lot of great comments, I especially like the one to put 35% down. In the pass, whenever I had a unique property or I just can't find comps, I asked the seller to pay for an appraisal and I'll reimburse the cost at closing. Sooo, disclose the counter the downpayment at a level where the appraisal issue will go away.
Having multiple offers is excellent value/market indication. When I had a similar situation I wrote a letter to the appraiser mentioning how many offers and what value range in percentages the offers were. It worked.
Something this unique would require an appraiser come to the property before the list price is set. I would carefully review these properties and do drive bys and talk to the agents who sold those properties to confirm they are likely comprables. You can then let prospective buyers and agents know you've done this. Since they may need a loan, more than likely the same comps are going to be used by their appraiser.
In your counter offers, have buyers remove the appraisal contingency. If it doesn't appraise, buyer will be required to make up the difference.
Good luck. I think most appraisers are going a little higher with values than in the past. The thinking is prices will continue to appreciate after the low lows of the past few years.
The nice thing about multiple offers is you can choose the offer that is not contingent on an appraisal or financing.
Spirit is right on with his recommendations. Bring a write-up to give the appaiser supporting the price and any comps you have found. If there are no comps the appraiser may use "replacement cost" as the base. At the end, the appraiser will make a decision of value. Good luck. This is a problem we all face, but make sure the appraiser knows there are multiple offers to support the price.
I had a situation similar to yours, so I typed up the list of upgrades which amounted to $30,000 and I met the appraiser and pointed out the terrific view. The appraisal came in at the purchase price.
Having details of all upgrades and comps used is good. With multiple offers in place, the market is making a statement and the appraiser should hear it as well.
Hi Synthia- hopefully you end up with a cash buyer which is always helpful.
More than likely the appraiser will have to "go outside" the immediate area of the property if there are no comps & if they want to truly match "apples to apples".
I had an appraiser just last week go 5 miles outside of my listing for comps & thankfully it worked in the seller's favor. Hopefully; it'll be the same for you.
I think I'll sit back and watch as the answers come it.. so far there are some awesome suggestions here....
Lots of excellent comments/advice from others which I would follow. Oftentimes when this happens, an appraiser will be forced to go out to a greater distance to try to find comps in other communities. I would definately meet the appraiser there with a big smile and as much ammunition as possible.
tough call, I will watch the posts from others
Which buyer is the most likely to cover the shortage on the appraisal? Pick that one.
Someone mentioned the buyer sigining off on the appraisal - AIN'T GONNA HAPPEN ON THIS BIG BLUE PLANET.
Closing one this morning. No way I thought this would appraise since seller had a lot of imput on the price. But multiple offers helped and the lender was not a big bank.
This is a common problem in today's market. In many situations the informed buyer knows what it costs for specific upgrades and improvements. And, some appraisers will place more weight on specific amenities for upgrades. I do a lot of sales in a subdivision where some of the homes have amenities over the edge and have this conversation with appraisers frequently.
So, when I am in multi offer situation, I always ask the agent to ask their buyer if they are willing to pay the price, even if the house does not appraise at the sale price. If so, would they put that on a separate addendum so it doesn't create a midset for the appraiser. Sometimes agents will kill the deal and say, I can't let my buyer pay over appraised value, only to have their buyer loose the home to another buyer who saw the value. And, if the buyer won't pay the difference, there could be a certain amount that could be agreed upon. This has worked for me time and again. Hope this helps and good luck.
I had this problem two weeks ago. What I did was I took the highest offer within reason, and I alerted the seller that there might be an appraisal issue. Much to my surprise our value came in at the asking price. There were no comps to support what I thought was the list price, but that's with the seller wanted to start at. We ended up above asking price and still appraised. Sometimes you just have to be completely open and honest and take a leap of faith. Good luck!
Since you have an appraisal, my guess,you got offers that needs funding. Make sure that you meet the appraiser and explain to him in details all unique features of this property, bring your comps; I'd also recommend to disclosure to him that you received multiple offers, all close to the asking price. If the inspector is experienced, he will know what to do.
Ask your client, but for many security beats price. Cash, larger than average down payments or buyers willing to waive the financing or appraisal contingencies should have an advantage of some that won't buy have a higher offer amount.