There are more than a few roadblocks to overcome when closing a real estate deal, so agents are generally willing to do whatever they can to avoid potential bumps. At the GCAR GIG last month, Wells Eady, owner of Eady Appraisal Services, presented a list of ten things Realtors can do to optimize the appraisal process. Here’s the list along with additional thoughts about certain items:
10. Send a fully executed and signed contract with all counter offers, change orders and amendments.
“This has been an issue for a while. A fully executed contract is a contract both parties have signed and accepted. In the past, a contract would come over, and the appraiser would accept it, even thought it was merely an offer, and both parties had not yet signed it. Appraisers are not supposed to accept only an offer, but it happens.
“So, the appraiser would complete the appraisal, turn it in at one value, and then be told there was an addendum or a counteroffer to the contract, changing the sales price. The change is typically to a higher price and usually includes a repair item, the installation of new carpet, a new appliance and so on.
“With new construction, the borrower has usually added upgrades to change orders. I’ve seen this increase the sales price 25 percent of the cost of the home. When either of these situations occurs, the appraiser has to redo the appraisal, costing valuable time,” Eady says.
9. Make sure the seller’s name is the same on the contract, the deed and the title work.
“I have seen the last name of a female owner who’s either married or divorced differ from what’s in the public records,” Eady says.
8. In the event of a portion of a parcel and a home being sold, a survey needs to be provided, and the amount of land needs to be described or identified.
“It’s possible to appraise a home on a portion of a larger parcel, such as a home and five out of 100 acres. The appraiser needs to know, and is required to identify, the five acres. Think about a 100-acre parcel that’s partially located on a scenic mountain bluff, while the other half is in a fold plain. You can imagine the difference in value between the two areas. Without proper identification, the appraiser won’t know how to value the home,” says Eady.
7. Remember the three S’s: Safe, Sound and Secure. A home is collateral for the mortgage. At minimum, the home needs to be protected from the elements, or further damage if vacant.
“The home is collateral for the bank, which will want to recoup its money should it need to collect on default of the loan. Most banks are not in the “fixer-upper” or property management business. They want to know that their “investment” or “collateral” would remain intact and retain value if left vacant for some time. If they take over a property, they don’t want to risk a loss because of something like a giant hole in the roof. They also don’t want someone coming in and shocking themselves, or a loose connection catching the home on fire,” says Eady.
6. Power and water need to be on for almost all loans. “Power and water need to be on to make sure the mechanicals – outlets, faucets, water heater, HVAC and so on – are functioning. While this isn’t technically required, it’s become such a common issue for underwriters that it’s an “understood” requirement.
5. Pull comparables. “While some appraisers might not look at the comparables, it’s always helpful for an agent to pull sales for the appraiser to consider. The agent cannot manipulate the value, but he or she can ask the appraiser to consider certain sales. It’s up to the appraiser to determine if the sales should be included in the report.
4. Personal property is not to be included on a real estate contract. For example, a $20,000 home theater is personal property and cannot be included in an appraisal.
“I’ve seen agents include personal property on a real estate contract. The most common items are home stereos in the man cave and hot tubs. I do a lot of foreclosure work, and these items are never in the home following a foreclosure, as the homeowner always takes them when they leave. Most lenders know this happens, and they don’t want to loan money on a personal item they won’t be able to sell. Personal property should always be included on a bill of sale,” says Eady.
3. Consider active listings. “Active listings are important to an agent when they’re pricing a home, especially in a down market. Would you pay $30,000 for a new car when a dealer across town has the same one for $26,000? It’s the same with a home, even though the two homes might not be identical,” says Eady.
2. Leave the lockbox on the door. If the homeowner wants it removed, then leave a key with a neighbor or put the notes in the file so someone can meet the appraiser.
“Agents sometimes take the lockbox off the door, usually at the request of the homeowner, as homeowners usually think this will keep unwanted agents from coming in, or people from thinking the home could be vacant. This creates a headache for appraisers when we can’t gain access. This usually results in the inspection having to be rescheduled and an additional trip fee,” says Eady
1. Provide a list of recent improvements, upgrades and updates. “Having the homeowner list recent upgrades is not only helpful to the agent listing the house but also to the appraiser, as it can give him or her an idea of the true condition of the home,” says Eady.
For more information and tips, visit www.eadyappraisals.com.