Category Archives: real estate appraisal

Appraisal Contingency protects buyer, enables purchase price reduction

Appraised value: $380,000.

Mortgage amount: $342,000.

Purchase price: $396,000.

Mortgage type: 30-year fixed.

Rate: 4.375 percent, no points.

Backstory: My clients were first-time home buyers and looking in Richmond for a home to accommodate their growing family. Their agent, Felipe Acobes with Better Homes and Gardens Real Estate in Oakland, located a three-bedroom, two-bathroom home that met all of their requirements.

However, the property had its complexities. There was a partially finished garage and a bonus room — both done without any permits — and a significant amount of deferred maintenance. The list price was $399,000, a price that was expected to be overbid.

The buyers offered $428,800, which was accepted. In this competitive market, it is not uncommon for buyers to pay a price that does not discount the existence of non-permitted improvements and defects.

When this happens, the appraised value at times does not justify the purchase price.

In these cases, the buyer may be willing and able to increase their down payment to make up the difference. In this instance, the buyers were already getting gift funds from relatives for their 10 percent down payment and to cover closing costs, so they had little ability to bridge any price/appraisal gap.

Fortunately, Acobes had placed an appraisal contingency into the offer to protect the buyers in case of a value under offer price.

Because of the property permits and repairs issues, the appraised value came in at $380,000. Acobes was able to work with the seller to renegotiate the property price down to $396,000. Without this renegotiated price, the buyers would have had to bring in a down payment of $86,800. Instead, they just needed to bring in $54,000, something they were able to do.

Buyers are often advised that they will be more competitive if they don’t have contingencies for things like financing, appraisal or inspections. In most cases, this works out fine. But in cases in which the buyer’s agent recognizes a potential appraisal problem, a prudent Realtor will work to structure an offer that appeases the lender, protects the buyer and results in a transaction that works for the seller.

Disclaimer: for information and entertainment purposes only

San Diego home sales drop to lowest point since 2007

San Diego County home sales dropped 17.5 percent to the lowest level in 11 years for a September in the first significant sign of a slowdown in the market, real estate tracker CoreLogic reported Tuesday.

Last month, 2,942 homes sold in the county, down from 3,568 sales a year ago. It was the lowest number of sales for a September since just before the Great Recession when 2,152 sold in September 2007. Also, last month’s median home price dropped to $575,000 — the first decrease since January — after hitting an all-time high of $583,000 in August.

Most experts attributed the slowdown to a rise in mortgage interest rates, and the sale price reduction to potential buyers balking at higher monthly payments.

“Mortgage rates (are) another thing that is going to add cost, and temper demand,” said Cheryl Young, senior economist at Trulia. “Rates are hovering around a seven-year high so people are really, possibly, taking a step back before they jump into home buying.”

read more at:

disclaimer: for information and entertainment purposes only

Housing market is showing signs of hope

If you’ve been distracted by the federal government shutdown, political dysfunction, stock-market volatility and reports of rising mortgage rates, it wouldn’t be surprising if you concluded: No way is this a good time to even think about buying a house or putting one on the market. Things are too crazy. Nobody’s paying attention to real estate anyway.

But take another look. Some of the real-estate fundamentals have been changing for the better. Take mortgages. They’ve gotten cheaper. As of last week, you could readily find conventional rates averaging 3.87 percent for five-year adjustable-rate home loans, or conventional 30-year loans at fixed rates of 4.45 percent, according to investor Freddie Mac. That compares with late last year, when they were at 5 percent or higher, depending on an applicant’s credit profile.

Sure, rates are slightly higher than they were a year ago, when the 30-year fixed rate averaged 4.2 percent. And yes, when you take out a five-year adjustable loan, your payments are fixed for the first 60 months and then are subject to adjustments — up or down — once a year. So you take on future rate risk in exchange for a super low rate the first five years.

But combined with other recent trends — growing inventories of homes available for sale, slower price inflation and even modest price reductions — the decline in mortgage rates should be encouraging for anyone seriously in the market for a home. And even for heads-up owners looking to sell.


  • New mortgage applications of home buyers nationwide during the week that ended Jan. 11 soared to their highest level since 2010 — and were 9 percent higher than they were the week before, according to the Mortgage Bankers Association. Clearly the word is out among buyers who learned about the rate declines: They’ve been rushing to nail down financing at a brisker pace than is typical for this time of year.

read more at:

Disclaimer: for information and entertainment purposes only