You’ve signed a contract and are ready to buy or sell. The rest is pretty standard right? Just show up at closing, sign some papers and you’re done.
Not so fast. You still have a few hurdles and your broker can and should help.
Both the home you’re selling and the home you’re buying have to appraise for the new mortgage loan amounts or the deal can fall apart. If the appraisal comes back for less than the sale price, if you’re the seller, you’re going to have to renegotiate the price or hope that the buyer can come up with the difference in cash between the appraised value and the sale price. If you’re buying a home, you are the one left scrambling if you really want the house and the seller isn’t willing to lower their price.
However, if a home does come in at less than the desired price, your broker can help change the mortgage broker’s mind. Seems unlikely, but it’s true! The mortgage broker or bank has hired an appraiser to appraise the property, but they are not infallible. Like any of us, they make mistakes. The broker should review the appraisal and the list of comparable properties and determine if the properties selected are truly comparable to the property being bought or sold. Those properties are adjusted by the appraiser to become “comparable” but there could be errors in the listings of the other properties or adjustments could be applied inconsistently or the appraiser may have missed something like a parking spot, extra bathroom or possibly a different floor if one of the properties is a condominium. The property might be inappropriate because it’s in a different school district or flood plain or any number of things.
After reviewing the appraisal, the broker can compile their own “rebuttal” appraisal and submit it to the mortgage broker, usually within two or three days. The rebuttal may have more accurate comparable properties, correct for errors in the initial appraisal and point out inconsistently applied adjustments (for instance, adjusting the comparable property price one amount for an extra bathroom, but a adjusting a different amount for another property).
The rebuttal process can delay the closing if you’re on a tight schedule, but it could also save you thousands of dollars in either what you’ll make on your sale or save you from having to scramble to come up with potentially significant dollars. One of my clients this year had the appraisal come up $12,000 short and I was able to successfully refute the appraisal and reset the value at the sale price.
Next time, more ways your broker can still help close the deal!
-Written by Broker Associate, Joe Sutton