Real Estate Appraisal Hacks to Get Under Contract

Don't get outbid or underfunded due to appraisals. You might bid $20,000, $30,000, $50,000 or even $100,000 over the asking price, and it may seem obscene to you. But, if I pay $100,000 over asking, and overvalue, how long will it take to make that value back? You'll still make it back and quickly. Denver Metro appreciate lately at double digits during the past couple of years. Will you purchase this and is this the height or is this a bubble? 

We have a strong economy underneath to help ensure you will make back that additional money you spent to secure the home of your dreams. Prices of homes will not come down. Builders can't build their way out of this because of supply chain issues.

The largest group of home buyers is 30. We have the next 2 to 3 years of supply issues to contend with. So you may be asking, "How do I get in? What are some of the hacks I can use?"

Let's talk about appraisals.

Desktop Appraisals:

It had been that you could request a desktop appraisal if you know that a seller had COVID, or requests to have a desktop appraisal to avoid having people over. This means the information is gathered from comps, historical data, past photos of condition inside and out.

This has stopped, but a variation is restarting. The pandemic is no longer a valid reason. Sandra Thompson said she'd bring it back in January. That didn't happen until now. It's very small. You can request a desktop appraisal, AUS for conventional only, Fannie, Freddie, not FHA, purchased as a primary residence with a minimum of 10% down. If you do a desktop appraisal and it comes in low if it goes higher than 90%. Let's do the math. $600,000 home. You put $60m000 down. If the value comes in at $560,000, now the loan is no longer at 90% because of that. If that happens, Fannie and Freddie will keep using a desktop appraisal, it won't go away.

When do you want o use a desktop appraisal?

Absolutely you want one if the listing agent has pictures of the home that are better than the current conditions.

You've done the walk-through, you'll do the inspection. But from a value perspective if I know the house has gone through some wear and tear, if it's currently being rented, or there are extenuating circumstances that would detract from the overall experience of the appraiser when they walked through it. What if the home backs up to a grocery store? Is that a distractor? No. But if there's nothing hiding that. That may affect the experience of the appraiser again. They are supposed to be completely unaffected by these factors, but they are human.

When you do not want to use a desktop appraisal?

When you are on point, remodels done, etc. when you want measurements to be done, you want a full report.

The benefit of a desktop appraisal is that anyone involved can give it to the appraisal company - photos, comps, etc. to the appraiser to evaluate. The agents can meet the appraiser at the home with a comparables package. 

Speed and price are factors too. It may be faster if there are not many appraisers in the area. Denver - appraisers are bored. Not enough for them to do.

This is coming back as an option March  6.

Appraisal Waiver

An appraisal waiver can get when you run through the AUS and it tells you that data from Fannie and Freddie, had a loan, and it was insured by Fannie or Freddy. That database can determine the appropriate value of that home based on the appreciation numbers that exist and past history. The value that is put in the file was within the bracket too.

Example: listed $739k, $851k offer, and got appraisal waiver?

This means you do not need to order an appraisal as long as the parameters of that loan don't change.

What if you put 20% down, and then changed it to 15%,? You could lose the appraisal waiver because you changed the parameters of the loan.

They can be run before you go under contract. If you don't get it, the loan will be terminated based on the non-fulfillment of that contract.

 

Appraisal Gap Insurance.

If you go in with an asking price of$739,000 and offered $851,000, what if you don't get the waiver? "I'll cover the gap". 20% down, shift the loan to value and absorb the difference and not have that buyer bring extra to the closing table. This is also known as mortgage insurance.

Feels like cash is king. It's extremely competitive.

What are the disadvantages if I don't have cash?

In the last 30 days in the Denver market, 18.7% of the closings were done with cash. The remainder had a loan. You have only a slight disadvantage, but you are not in an end-all situation.

Know your appraisal options. The Rueth Team Fairway Mortgage can do a TBD underwrite before you find the property so you can close it in 8-10 days. Learn more about this option by calling our office.