PRE-PURCHASE APPRAISALS FOR REALTORS & HOME BUYERS
A home purchase is one of the largest investments anyone can make. It’s an exciting process but stress and uncertainty are often involved. Many buyers today retain a Buyer Broker to represent their best interests since listing agents and selling sub-agents represent the seller and are no longer legally required to be fair to buyers.
Many lenders today obtain “drive by” appraisals which rely on tax office living area for a home. When a borrower’s credit and down payment are good enough, the loan closes. Quite often, the buyer gets a substantially different home than tax records indicate!
Pre-purchase appraisals will identify a home’s actual living area and market value BEFORE a home buyer makes an offer and ties up earnest money.
Six times out of ten, tax records are wrong about home size. Even though appraisers don’t rely on “price per square foot” to estimate value, living area will substantially influence its market value and what buyers should pay.
Pre-purchase appraisals will identify any major condition problems and could help buyers avoid costly mistakes.
Buyer Brokers can reduce their own liability by recommending a pre-purchase appraisal with full interior & exterior inspection plus a measured floor plan. Issues can be negotiated and resolved before a lender gets involved.
The definition of value listing Realtors use is “highest possible” selling price and agents are obligated by their fiduciary relationship with each seller to try to get the highest price no matter how long it takes. On the other hand, Real Estate Appraisers estimate the “most probable” selling price for lenders and buyers within a reasonable marketing time. There is often a substantial difference between these two values!
Pre-purchase appraisals will help provide Realtors and home buyers with negotiating leverage.
Pre-purchase appraisals will help unrealistic sellers understand their property value.
Sellers will be more likely to accept a buyer’s offer if it is supported by an accurate appraisal.
Even if emotional buyers want to pay more than a property is worth, they are not justified in doing so since they could acquire a similar property in a similar location for a lower price. Also, even if buyers and sellers agree on the “highest possible” selling price in a purchase contract, the sale will fall through when the mortgage appraiser reports the actual value to the lender. Pre-purchase appraisals will help your buyers get the most for their money.
Why not resolve these issues in advance?
A pre-purchase appraisal will prevent your deal from falling apart or being delayed. Since time kills all deals, Buyer Brokers can enjoy our three day appraisal service and avoid waiting two weeks for the typical mortgage appraisal! A pre-purchase appraisal can even help sellers determine if a contribution to the buyer’s financing is possible.
An accurate appraisal is very important because so much national wealth lies in real estate that the determination of its value is critical to the economic well being of society as a whole.
Also, since the appraiser is trained to be an impartial third party in the lending process, the appraisal serves as a vital “check in the system” and protects buyers from overpaying for property as well as lenders from over-lending to borrowers. An appraisal is a lot more than a “price per square foot” exercise.
Buyer Brokers should stop and think…if your buyer pays too much for a home, no one else will be blamed when they learn the truth. Future referrals depend on happy buyers.
My own real estate career started in 1977 with Sterling Realtors, in the Park Cities, so I’ve had the opportunity to help many people purchase homes! I decided to appraise real estate full time in 1983 and I’ve worked with thousands of Realtors and buyers over the last four decades. We have also received many awards for appraisal accuracy from national relocation companies!
An experienced appraiser can also estimate the increase in value when condition problems are corrected which would confirm a home’s value for reluctant buyers considering a fixer upper!
I welcome the opportunity to correctly appraise your buyers’ dream homes.
Warmest regards,
Lyle F. Gallagher