Selling A House on Your Own

Forum for posts that are not hockey-related.

Moderators: Three Stars, dagny, pfim, netwolf

Re: Selling A House on Your Own

Postby tifosi77 on Fri Jun 07, 2013 2:38 pm

PensHckyFan79 wrote:I am in the processing of buying a house, close on the 26th, and the house was appraised 2k over our accepted offer, to me that seems like a win, I'm paying less for a more expensive house? why are you guys complaining about it?

If an appraisal comes in low and the seller doesn't agree to lower the selling price, the buyer gets a get-out-of-jail-free card and can cancel the contract with a full refund of their earnest money. I can't imagine the reciprocal wouldn't be true for the seller if the price comes in over the agreed price and the buyer doesn't agree to up their offer.

We were actually in danger of this happening to us on our last house. We matched another offer to win the bid, and in so doing had to remove the appraisal contingency. All was fine and dandy until the bank required an appraisal review........ if the review determined the actual value to be below what we agreed, the bank would only write a mortgage for the lower appraised amount and we would have been on the hook for either making up the difference out of pocket or canceling the contract and forfeiting the earnest money. Thankfully the appraisal was confirmed and everything went off as planned.
Last edited by tifosi77 on Fri Jun 07, 2013 2:41 pm, edited 1 time in total.
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

Re: Selling A House on Your Own

Postby knives of ice on Fri Jun 07, 2013 2:41 pm

the entire process from the real estate agents, to the inspections, to the appraisers if a complete joke especially if you are buying a house.
knives of ice
AHL'er
AHL'er
 
Posts: 3,782
Joined: Thu Dec 21, 2006 3:36 pm
Location: good riddance Armstrong

Re: Selling A House on Your Own

Postby Pitt87 on Fri Jun 07, 2013 2:41 pm

tifosi77 wrote:
PensHckyFan79 wrote:I am in the processing of buying a house, close on the 26th, and the house was appraised 2k over our accepted offer, to me that seems like a win, I'm paying less for a more expensive house? why are you guys complaining about it?

If an appraisal comes in low, the buyer gets a get-out-of-jail-free card and can cancel the contract with a full refund of their earnest money. I can't imagine the reciprocal wouldn't be true for the seller if the price comes in over the agreed price.


Keep in mind what the appraisal is for... its not relevant to sale price, its relevant to the mortgage of property. Banks can't collateralize debt for property that isn't worth the amount owed.
Pitt87
AHL All-Star
AHL All-Star
 
Posts: 5,255
Joined: Tue Apr 28, 2009 11:33 am
Location: Admin wrote:Rooting for the Flyers is not allowed here. Seriously.

Re: Selling A House on Your Own

Postby pfim on Fri Jun 07, 2013 2:58 pm

tifosi77 wrote:
PensHckyFan79 wrote:I am in the processing of buying a house, close on the 26th, and the house was appraised 2k over our accepted offer, to me that seems like a win, I'm paying less for a more expensive house? why are you guys complaining about it?

If an appraisal comes in low and the seller doesn't agree to lower the selling price, the buyer gets a get-out-of-jail-free card and can cancel the contract with a full refund of their earnest money. I can't imagine the reciprocal wouldn't be true for the seller if the price comes in over the agreed price and the buyer doesn't agree to up their offer.


I've never heard of a seller holding that option, that's a buyer's contingency related to the financing (loan to value). If the appraisal comes back at more than the contract price, it's irrelevant-both to the contract and practically.
pfim
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 16,789
Joined: Tue Jan 31, 2006 8:35 am
Location: Sitting in front of my computer

Re: Selling A House on Your Own

Postby tifosi77 on Fri Jun 07, 2013 3:13 pm

The mortgage is written based off the lower of the appraisal or selling price. Any appraised amount over agreed selling price is just instant equity for the buyer and has no effect on the mortgage. In effect, that becomes a bigger bonus for the bank, because the bank has extra collateral.

I mean, yeah in recent years they could collateralize that and bundle a bunch together in an MBS. But not now.
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

Re: Selling A House on Your Own

Postby pfim on Fri Jun 07, 2013 3:21 pm

Yeah, but the seller can't come back to the buyer for more money if the appraisal comes in high. The seller doesn't even see the appraisal.

It's not really instant equity as the bank will take the lower of the sale price and the appraisal as the LTV number. And really, after you close, what's the value of your house? You'll either need to sell it or get another appraisal to find out.
pfim
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 16,789
Joined: Tue Jan 31, 2006 8:35 am
Location: Sitting in front of my computer

Re: Selling A House on Your Own

Postby tifosi77 on Fri Jun 07, 2013 3:37 pm

Right, but if the appraised value is X and the mortgage is only .9X, could the new buyer not immediately tap into that in the form of an equity loan? You also luck out with Mr. Taxman for a while, funding schools at a slighter lower rate than you should be doing.
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

Re: Selling A House on Your Own

Postby pfim on Fri Jun 07, 2013 3:48 pm

tifosi77 wrote:Right, but if the appraised value is X and the mortgage is only .9X, could the new buyer not immediately tap into that in the form of an equity loan? You also luck out with Mr. Taxman for a while, funding schools at a slighter lower rate than you should be doing.


You'd have to go through another lender, who would probably require another appraisal. I know as a lender I'd be suspicious of any appraisal that comes in significantly high enough to justify an equity loan. It wouldn't make much sense.
pfim
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 16,789
Joined: Tue Jan 31, 2006 8:35 am
Location: Sitting in front of my computer

Re: Selling A House on Your Own

Postby shmenguin on Mon Jun 10, 2013 10:46 am

PensHckyFan79 wrote:I am in the processing of buying a house, close on the 26th, and the house was appraised 2k over our accepted offer, to me that seems like a win, I'm paying less for a more expensive house? why are you guys complaining about it?


because it's lazy and imprecise. you can put 30 grand worth of work into your house (getting new windows, gutting bathrooms, re-finishing floors) and an appraiser will ignore all of that and just compare your square footage and # of bedrooms to a crappy house down the street that just got sold for peanuts.
shmenguin
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 22,835
Joined: Mon Nov 06, 2006 11:34 pm

Re: Selling A House on Your Own

Postby shafnutz05 on Mon Jun 10, 2013 10:51 am

tifosi77 wrote:I've never heard of an appraisal coming in over the agreed purchase price. Under, sure. But over? There's just no reason for that. Especially when you're talking about a fraction of a percent of the total value. That's just utterly stupid.

Were you given a reason for the appraisals being over price?


We just closed last Tuesday on our new home. The appraisal came in about 8 percent over the agreed selling price, they had just lowered the price and were desperate to move because of a divorce situation.
shafnutz05
NHL Third Liner
NHL Third Liner
 
Posts: 57,105
Joined: Tue Jun 02, 2009 5:10 pm
Location: Amish Country

Re: Selling A House on Your Own

Postby tifosi77 on Mon Jun 10, 2013 6:43 pm

shmenguin wrote:you can put 30 grand worth of work into your house (getting new windows, gutting bathrooms, re-finishing floors) and an appraiser will ignore all of that and just compare your square footage and # of bedrooms to a crappy house down the street that just got sold for peanuts.

Is that actually legal in PA? For both of the houses we've bought, the appraiser came out and took very detailed photos of all the fittings and finishes and used those to construct a comp list. It actually seemed very exact and precise, the opposite of arbitrary. (Altho our agent did say that appraisers tend to be a bit behind the curve with the market.)

shafnutz05 wrote:We just closed last Tuesday on our new home. The appraisal came in about 8 percent over the agreed selling price, they had just lowered the price and were desperate to move because of a divorce situation.

Congrats! :thumb:
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

Re: Selling A House on Your Own

Postby Kovy27 on Mon Jun 10, 2013 7:15 pm

I'm closing in about 19 days on my home. This process was annoying and I'll probably do it again in 5 years or so.
Kovy27
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 24,614
Joined: Sat Jan 28, 2006 2:56 pm
Location: Break Down the Walls of Kovy27

Re: Selling A House on Your Own

Postby shmenguin on Tue Jun 11, 2013 9:21 am

tifosi77 wrote:
shmenguin wrote:you can put 30 grand worth of work into your house (getting new windows, gutting bathrooms, re-finishing floors) and an appraiser will ignore all of that and just compare your square footage and # of bedrooms to a crappy house down the street that just got sold for peanuts.

Is that actually legal in PA? For both of the houses we've bought, the appraiser came out and took very detailed photos of all the fittings and finishes and used those to construct a comp list. It actually seemed very exact and precise, the opposite of arbitrary. (Altho our agent did say that appraisers tend to be a bit behind the curve with the market.)


this was NJ, but either way, i imagine the appraiser could explain their way out of it without getting into trouble. they didn't do it this way "on the record", but there's no other way to interpret their findings from where i sat. we were trying to get a loan to add a new kitchen and great room onto our house. it would have been over 500 sq ft more space, the kitchen would have had brand new, high-grade cabinets, counter tops and floors (and appliances FWIW). for the great room, we were adding a fireplace and hardwood floors. we also building a first floor laundry room/mud room - which has a ton of implicit value compared to having to go down to the dingy basement to do laundry.

the appraiser looked at our plans, came over to inspect the house and concluded that all of this work added a whopping $30,000 onto the value of our house. that's patently absurd. that wasn't even half of the cost of getting the work done. attached to her report were real estate listings from around the neighborhood of "comparable" houses that had no evidence of being the same quality as ours, but they were the same sq ft and had the same number of bedrooms. so basically, those houses determined the value of our upgraded house. we had to cancel everything because of the appraisal, which cost us a couple grand in paying an architect that we never used. not to mention the headache.
shmenguin
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 22,835
Joined: Mon Nov 06, 2006 11:34 pm

Re: Selling A House on Your Own

Postby tifosi77 on Tue Jun 11, 2013 10:04 am

shmenguin wrote:the appraiser looked at our plans, came over to inspect the house and concluded that all of this work added a whopping $30,000 onto the value of our house. that's patently absurd. that wasn't even half of the cost of getting the work done. attached to her report were real estate listings from around the neighborhood of "comparable" houses that had no evidence of being the same quality as ours, but they were the same sq ft and had the same number of bedrooms. so basically, those houses determined the value of our upgraded house. we had to cancel everything because of the appraisal, which cost us a couple grand in paying an architect that we never used. not to mention the headache.

Actually, for the work you describe $30k in added value didn't sound out of line to me.

In the Mid-Atlantic region, a kitchen remodel returns about 62% on investment, great/family rooms tend to add about 55% the cost of the reno. So for you to have been trending with your market, your budget would have been ~$47,000, give or take, if the reno work was going to add $30,000 in value.

But you said that the appraised new value wasn't even half your reno budget. So if the appraisal was accurate, that means he thought you were renovating your house out of scale to your market. Let's say your budget was $70,000; normally your return on that would be ~$41,000 or so. That $11k difference between expected and appraised could be the fact that your improvements were not in line with the local market. In other words, a $41k increase in your home's value might make it significantly out of scale with other similar houses in your area. (I don't know your area, but adding that kind of value to a house is a pretty big chunk in normal-people real estate.) So the appraisal has to temper the local market with what you're doing, and so you end up with a post-renovation appraised value that's significantly less than expected.

I could easily spend $75,000 on a kitchen reno, had I the money.... shoot, I could spend double that in appliances and tools alone. But it would skew the value of our house so badly that we'd only probably see a sub-50% return.

Now, that's only really an issue if you don't expect to be in the house for more than a few years. But if you plan on being there for five-plus, and the renos are real quality-of-life things for you and your family, then it makes sense to go ahead (if you can) with those kinds of improvements. But if you realistically don't think you'll be in that house past five years, pare things down to maximize your return.
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

Re: Selling A House on Your Own

Postby pfim on Tue Jun 11, 2013 10:15 am

Long story short, you don't want to have the nicest house on your street (if you're looking at re-sale value).

It's something we're grappling with now in our choices for our kitchen finishes. Sure, I'd like great tile and granite counter tops, but I know if I sell my house I'd never get the money back because that isn't the norm for my neighborhood. I wouldn't care if I knew I was going to stay there for 30 years, but I doubt very much that I will. Certainly you face a somewhat different problem in that you can't finance what you want to do because of the appraisal.

To the other point, when we purchased our house our appraiser didn't visit the house. It was strictly a comparison of the comps in the area.
pfim
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 16,789
Joined: Tue Jan 31, 2006 8:35 am
Location: Sitting in front of my computer

Re: Selling A House on Your Own

Postby KennyTheKangaroo on Tue Jun 11, 2013 10:25 am

kenny the kangaroo has been battling with the issues behind buying the nicest house on the block for the past two weeks. there is one house that really suits this gentleman's fancy but:

a.) the houses surrounding it are smaller, shoddier, lack the special feature that the house in question has, and sell for probably half the price

b.) many of the surrounding houses are rentals

c.) the school district is small and getting smaller, and is rather mediocre
KennyTheKangaroo
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 12,096
Joined: Sun Nov 19, 2006 12:15 am
Location: Under the Skycoaster

Re: Selling A House on Your Own

Postby shmenguin on Tue Jun 11, 2013 10:28 am

tifosi77 wrote:
shmenguin wrote:the appraiser looked at our plans, came over to inspect the house and concluded that all of this work added a whopping $30,000 onto the value of our house. that's patently absurd. that wasn't even half of the cost of getting the work done. attached to her report were real estate listings from around the neighborhood of "comparable" houses that had no evidence of being the same quality as ours, but they were the same sq ft and had the same number of bedrooms. so basically, those houses determined the value of our upgraded house. we had to cancel everything because of the appraisal, which cost us a couple grand in paying an architect that we never used. not to mention the headache.

Actually, for the work you describe $30k in added value didn't sound out of line to me.

In the Mid-Atlantic region, a kitchen remodel returns about 62% on investment, great/family rooms tend to add about 55% the cost of the reno. So for you to have been trending with your market, your budget would have been ~$47,000, give or take, if the reno work was going to add $30,000 in value.

But you said that the appraised new value wasn't even half your reno budget. So if the appraisal was accurate, that means he thought you were renovating your house out of scale to your market. Let's say your budget was $70,000; normally your return on that would be ~$41,000 or so. That $11k difference between expected and appraised could be the fact that your improvements were not in line with the local market. In other words, a $41k increase in your home's value might make it significantly out of scale with other similar houses in your area. (I don't know your area, but adding that kind of value to a house is a pretty big chunk in normal-people real estate.) So the appraisal has to temper the local market with what you're doing, and so you end up with a post-renovation appraised value that's significantly less than expected.

I could easily spend $75,000 on a kitchen reno, had I the money.... shoot, I could spend double that in appliances and tools alone. But it would skew the value of our house so badly that we'd only probably see a sub-50% return.

Now, that's only really an issue if you don't expect to be in the house for more than a few years. But if you plan on being there for five-plus, and the renos are real quality-of-life things for you and your family, then it makes sense to go ahead (if you can) with those kinds of improvements. But if you realistically don't think you'll be in that house past five years, pare things down to maximize your return.


the idea was to do the renovation and stay their for the long haul. we have houses ranging from $220k to $500k all around us, so we weren't really making the house too nice for the neighborhood. we bought the house at $265. the market went down a bit, so let's say the same house we bought would sell for about $240. but we've replaced all the windows (including 2 expensive bay windows), re-did the floors and gutted our full bath. let's say that brings us back up to $250-260k or so. the appraisal came in at $280. that's after $80,000 + in renovation costs. that smells extremely fishy. i've been in a few of these houses that would be considered "comparable" to ours. sure, they have kitchens, but they have crap finishing. you'll also see a healthy dose of wood paneling on any additions they've built. that's the quality that's supposed to be the same as a major renovation that spared no expense? please.

ultimately, i think we'll spend the next several years saving up the cash, so we can do whatever renovations we want without using a bank. this plan gets a few weary glances, but we absolutely love our neighborhood, and we could either spend a ton of money in renovation, or move one town over and pay 15-20K a year in taxes on a house that would have the same polish.

edit...i realize it sounds a little contradictory to say that i'd have to move towns to find a house with that polish, and also say that there are nicer houses than mine in my neighborhood, but it's complicated...the nice houses in my hood are never for sale, and also i'm very picky about which streets i would want to live on in my town. so good houses exist around me, but they aren't in play.
shmenguin
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 22,835
Joined: Mon Nov 06, 2006 11:34 pm

Re: Selling A House on Your Own

Postby tifosi77 on Tue Jun 11, 2013 1:22 pm

Based on the way you've described it, I don't think the appraisal sounds that out of whack.

pfim wrote:To the other point, when we purchased our house our appraiser didn't visit the house. It was strictly a comparison of the comps in the area.

Wow, that absolutely boggles my mind. Notwithstanding the above, maybe shmenguin's got a legit gripe. I never imagined appraisals could be done in such a half-arsed way.
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

Re: Selling A House on Your Own

Postby pfim on Tue Jun 11, 2013 2:39 pm

Ok I went back and looked at the appraisal, they did inspect the house. I had it in my mind they didn't as the appraiser's office was a good 75 miles from my house. To our earlier discussion, the appraisal came in $3500 over the sale price (or $10k over what I "paid" as closing costs were included). I do find it disingenuous that the appraiser can review the sale contract as part of the analysis (and therefore see the sale price). Seems to take independence out of the equation.
pfim
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 16,789
Joined: Tue Jan 31, 2006 8:35 am
Location: Sitting in front of my computer

Re: Selling A House on Your Own

Postby tifosi77 on Tue Jun 11, 2013 2:49 pm

I don't mind the appraiser seeing the agreed sales price.

What I mind - and what is no longer legal - was collusion between the lender and the appraiser. Now (post-2008) lenders aren't even allowed to personally contact appraisers. Apparently in the past they often would work...... closely.
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

Re: Selling A House on Your Own

Postby pfim on Tue Jun 11, 2013 3:23 pm

I just think if they see that number, it becomes a magnet and the appraisal has been compromised (or at least it gives the appearance of). I mean, if I'm an appraiser I want as much work as I can get. I'm not going to get that if my appraisals don't get loans processed.

Then again, I'm not the lender so I don't really care.
pfim
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 16,789
Joined: Tue Jan 31, 2006 8:35 am
Location: Sitting in front of my computer

Re: Selling A House on Your Own

Postby Kraftster on Tue Jun 11, 2013 3:47 pm

On the issue of appraisals, does anyone have any idea what is required to have "basement" square footage counted in the living area square footage of a house? Our basement is 3/4 finished with carpet and contains one "living room" type of area with a bar and a separately walled off/door "bedroom" type of area but the basement is not counted in our square footage, at least not in the County assessment. The stairs are carpeted and at the bottom of the stairs there is concrete floor in an area about 10x7, which steps down into the carpeted living room, etc. Off to the side and underneath the stairs is a walled off area with washer, dryer, furnace, water heater, etc.

Could this little bit of concrete floor make a difference? Should I put a door on the washer/dryer area? I don't know if there is a technical definition issue going on here or if its a judgment thing. The carpeted area should even more so be counted because there is direct access outside (back yard) from the basement living room area since my house is built on a hill. There is a large window to the outside in both the basement living room and bedroom area too.

Trying to figure out how best to get my appraisal as high as possible for a refi. Since we bought our house three years ago, three houses on our street have sold. One $212, one $205, and then one a lousy $150k because of a foundation issue discovered during inspection. Our size without counting the basement is closest to the $150k sale but with the baseement will be closer to the others. We paid $169 3 years ago for our house.
Kraftster
NHL Fourth Liner
NHL Fourth Liner
 
Posts: 16,103
Joined: Mon Apr 09, 2007 9:25 am
Location: Frolik

Re: Selling A House on Your Own

Postby MWB on Tue Jun 11, 2013 4:31 pm

For the "bedroom" to count as a bedroom I believe it has to have a door and have an exterior exit. I think that would give you that extra square footage. I'm not sure about the living area though.
MWB
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 14,770
Joined: Mon Jan 30, 2006 1:36 pm
Location: Charlotte, NC

Re: Selling A House on Your Own

Postby tifosi77 on Tue Jun 11, 2013 4:35 pm

I'm not sure a finished basement can ever be included in the official square footage of a property; I think Fannie Mae guidelines dictate above-grade spaces only. But an appraiser can take below-grade work into account on a sort of supplementary report and factor that in when setting the market value. So the space might not factor into your tax assessment, but it can factor into setting the value for your home when you sell.
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

Re: Selling A House on Your Own

Postby tifosi77 on Tue Jun 11, 2013 4:37 pm

MWB wrote:For the "bedroom" to count as a bedroom I believe it has to have a door and have an exterior exit. I think that would give you that extra square footage.

In addition to that, I think in CA a room also has to have a closet to be legally marketable as a "bedroom".
tifosi77
NHL Healthy Scratch
NHL Healthy Scratch
 
Posts: 11,437
Joined: Sat Jan 28, 2006 3:33 pm
Location: White-Juday Warp Field Interferometer

PreviousNext

Return to NHR

Who is online

Users browsing this forum: 60sixx, cde1024, DudeMan2766, mikey287, roland, SolidSnake, Spangler, stopper40 and 8 guests


e-mail