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The home-buying process is a high-stakes thrill ride full of exhilarating ups and scary downs, but unquestionably one of the most deflating moments is when the appraisal comes in significantly lower than the accepted offer. This is, to use technical real estate lingo, “a bummer.”

Either you feel as though you got the raw end of a deal by paying more than the property’s worth or, if you don’t have extra cash to hand over, the deal can crumble into dust. (Your lender’s not going to fork over money for a higher loan amount if the appraisal came in lower than expected, so you’ll have to make up that difference yourself.)

“In a rising market, low valuations are pretty common because appraisals are based upon sales that closed when prices were lower,” says Diane Saatchi, a senior broker with Saunders & Associates in Bridgehampton, NY. “The reverse is so in a declining market.”

In other words: Appraisals can’t keep up with how quickly homes are selling in a hot market, so you’re bound to see lower-than-expected values placed on homes.So, what do you do if this happens to you? You have four options:

1. Appeal the appraisal

Sometimes called a “rebuttal of value,” the appraisal appeal takes some work. In fact, it’s a total team effort.

“The homeowner, loan officer, and often the real estate agent work together to find better comparable market data to justify a higher valuation,” says Casey Fleming, a mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.” 

That means everyone puts on their best Sherlock Holmes garb and gets to work looking for anything that helps the claim for higher valuation. Perhaps the appraiser overlooked some comps (homes similar in style, location, and square footage sold within the past few years).

“It’s not uncommon to discover, for instance, that the appraiser used a comparable sale that looks like it’s in great condition, when in fact the home was trashed when purchased and has already been rehabilitated,” Fleming says.

The loan officer writes an appeal using the new comparables and then sends it to the appraiser. There might be some negotiating back and forth until all parties come to a compromise with a new valuation.

Spoiler: It’s a hard battle to fight.

“My record on this one is 0 for 9 so far,” Fleming says. “But I know many appraisers personally who have adjusted their values.” So keep the hope alive!

2. Order a second appraisal

“Most often, if the appraised value is not as high as the agreed (contract) price, the seller’s agent will ask to see the comps and get a second or third appraisal,” Saatchi says.

But it will likely cost you–you’re not only paying for the first appraisal (in your closing costs), but you’ll pony up for any additional appraisals as well. They can range between a few hundred dollars and $1,000 depending on the area. Occasionally, real estate agents or sellers will foot the bill if they really want to keep the sale.

3. Negotiate with the seller

If you’re lucky, you and the seller will both budge a little.

“You might go back to the sellers and ask them to reduce the price or split the difference,” says Peter Grabel, managing director of Luxury Mortgage in Stamford, CT. “The seller is under no obligation to do so, but they may prefer to do this rather than take a chance of losing you as a buyer, and starting over again. It is likely that another buyer will have the same issue, so the seller might be better off renegotiating with you unless they have other offers.”

Sellers might be more willing to cooperate, especially if the Federal Housing Administration is involved. Lenders often require the use of their own FHA-approved appraiser, and these appraisals are “locked in” for six months.

“The seller could be forced to take a poor appraisal or wait it out for a buyer with a different loan,” explains Joshua Jarvis of Jarvis Team Real Estate in Duluth, GA.

Jeff Knox, broker and owner of Dallas-area real estate firm Knox & Associates, says this is the most common outcome in his area.

“Of all possible outcomes, this is what happens most frequently,” he says. “While the seller will usually be upset about the low appraisal value, most reasonable sellers eventually come to terms with the fact that any other appraisal values by potential future buyers will most likely come in at about the same value.”

4. Walk away

No one wants to let a property slip through their fingers, especially if it feels like their dream home. But beware of ignoring a low appraisal—you could end up losing thousands whenever you decide to sell.

If you have an appraisal contingency in your contract, you can walk away, get your deposit back, and hope for better luck the next time around.

This article was written by Maureen Dempsey for Realtor.com. She is a writer who covers fashion, beauty, lifestyle, and home decor. She’s recently learned that decorating her new home is just as satisfying as filling her closet.

 

Congratulations! You have just closed on your new home and are pulling the moving truck into the driveway, and the last thing on your mind is the yearly maintenance needed to keep your home in great shape. We have found a list complied on Zillow.com by See Jane Drill of DIY maintenance that should be done the first 3 months and then organized seasonally. Enjoy!

First three months

You’ll be busy enough moving in and getting settled, so we don’t recommend taking on a lot of work during the first few months. There are, however, a few things you might consider doing right away:

  • Change all the locks, and make spare keys.
  • Implement energy-saving measures right away to save you money on heating and cooling costs:
    • Hang a clothesline in the laundry room and/or outside to cut down on dryer costs.
    • Lower the hot water heater temperature to 120 degrees F. This is generally the hottest water temperature that anyone would need, and lowering the temperature prevents scalding accidents.
    • Install a programmable thermostat, and learn how to use it.
  • If you make your home comfortable for kids and pets first, you’ll be comfortable, too! Babyproof and petproof as needed.

Seasonal maintenance

We organized the tasks by season, but some items are interchangeable. This is simply a recommendation, so make it work for you!

Summer

  • Install ceiling fans to cut cooling costs, or reverse the direction of existing fans. Run your fans counterclockwise in the warm months, and clockwise in the cool months.
  • Inspect the roof for missing, loose, or damaged shingles. You don’t always have to climb up there to do this. In some cases, you can do this from the ground with binoculars.
  • Clean the roof and gutters of leaves and moss.
  • Fix large cracks in the concrete or asphalt driveways. Do this during warm weather, when you can expect a few dry days for proper curing time.
  • Inspect air conditioners, and replace the filter if necessary.
  • Have the fireplace inspected and the chimney swept. You’ll likely pay less for these services by doing it in the offseason.
  • Clean and repair or replace window and patio door screens.

Fall

  • Seal cracks in windows and doors with caulk or weather stripping.
  • Drain exterior plumbing, and cover outdoor faucets.
  • Clean carpets. You can do this anytime, but it’s nice to get it done right before the holidays!
  • Install a new furnace filter.
  • Replace batteries in smoke alarms and carbon monoxide detectors. A good way to remember this task is to do it when you set the clocks back for daylight saving time.
  • Clean the dust from heating vents, and make sure vents are obstruction-free.
  • Inspect and replace — or add — outdoor lighting around the front of your home and walkways. This helps keep people safe when it gets darker earlier.

Winter

  • Clear drains of hair clogs using a Zip-It drain cleaning tool or a drum auger.
  • Clean the oven. While you’re at it, make sure all your kitchen appliances are in good working order prior to the holiday season.
  • Check the insulation in your attic or crawl space, and add more if needed. A good general guideline: have at least 12 inches of insulation in the attic, and up to 16 inches if you live in a region with very cold winters.
  • Create a family fire escape plan, and do a few fire drills to make sure everyone knows what to do in an emergency.
  • Keep snow and ice removal supplies on hand, such as a shovel, snowblower, and salt or sand.
  • Compile an emergency kit for your household with extra water, food, medicines, flashlights, and other necessities.

Spring

  • Clean and refinish (where applicable) decks, porches, and patios to prepare for outdoor living.
  • Bring out the outdoor furniture, and clean grills so they’re ready for backyard barbecues.
  • Spring-clean all windows — inside and out.
  • Plant a tree. This is a fun family activity to do in your new home. Plant the tree strategically for shade in a particularly warm and sunny area of your home.
  • Once you’ve had the last fire of the season, close the fireplace damper to keep dirt and pests out.
  • Assess and inspect garden tools and lawnmowers to make sure they’re ready for a new season of working hard in your yard.
  • Because this is your first season in a new home, take some time to observe your yard before making any major changes. See where the sun shines at different times of the day. Watch which perennials come up at which times. Take notes about what you like about the current landscaping, and what you want to change or add to the landscape.

Most importantly, enjoy your new home! Taking care of these few maintenance jobs will help you love your home for many years to come.

I know you always hear this at the beginning of every year, but with the shrinking inventory, rising interest rates and prices, you need to jump in the home ownership pool now! Buy! Buy! Buy! (Insert New Kids On The Block song in your head as you read the last 3 words)

“It’s tough to buy a home today in most places in the country because there are so few homes for sale,” says Jonathan Smoke, chief economist for Realtor.com. “But if you wait to buy, then you’re gambling that the market will be better for you to purchase in the future.” And that’s not a smart gamble, realtor.com says. If you’ve been toying with the idea of buying, or you anticipate a life change that might force you to move—such as a new baby or a job transfer—you should be “buying as urgently and as soon as possible,” Smoke says.

Here are 3 reasons why:

1. Rates are rising

In 1981, when mortgage rates hit 18% and seemed to rise every day, single-digit rates seemed like an impossible dream.

Last August, however, rates on 30-year mortgages bottomed out at 3.55%. Now that the Federal Reserve finally decided to raise its key interest rate, mortgage rates have been climbing slowly. Today, the average rate is just above 4%; by 2019 or 2020, rates could easily climb to 6%.

Before you freak out, take heart: Rising rates aren’t necessarily a deal breaker for buyers. The National Association of Realtors® calculated that a rise from 4.2% to 5% would increase the average mortgage by $90—not nothing, but not a catastrophe, either. And if you take the long view, those higher rates are still historically low.

“For buyers there still is opportunity,” says Danielle Hale, managing director of housing research for the NAR. “For those who are still able to get into the market, these low rates continue to be helpful.”

Another upside: When rates go up, competition and prices often go down.

“I’d tell buyers not to panic, because higher mortgage rates eventually cause sellers to be more flexible on pricing,” DeNapoli says.

2. Inventory is shrinking

In November 2016, there were only 1.85 million homes for sale.  That’s a nearly 10% drop from the year before. And it continues a trend of steady decline since just before the housing crash, when inventory peaked.

Real estate experts predict that inventory will continue to shrink, at least for the foreseeable future. That means that in most areas of the country, buyers have more homes to choose from today than they will next year.

Or even next month. If you get moving now (during the winter, which is largely considered to be real estate’s off-season), you’ll have less competition for those homes than you will in the peak spring and summer months.

Bottom line: Every day you wait to start looking for a new home, you face stiffer competition for fewer homes.“If you think it’s bad right now, wait until April to August,” Smoke says.

3. Home prices are still rising

The bad news for buyers is that home prices now stand higher than before the 2007 crash, increasing 5% from 2015 to 2016. And housing experts expect an additional 2% to 3% jump in 2017, DeNapoli says.

“Prices continue to go up; we have yet to see that ceiling,” says Trevor Levin, a real estate agent with Nourmand & Associates in Los Angeles. “I think they have room to grow.”

How high prices will rise and how long they’ll remain high is anyone’s guess. Rising mortgage rates and the new Trump administration have introduced “uncertainty” into the real estate market, Levin says. “And uncertainty is never ideal,” he says.

So pick up your phone and call us at 720-314-6863 to go look at houses today!