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Fighting a “Low Appraisal”

September 28, 2012 by Leave a Comment

A friend of mine, who is an agent, called me the other day complaining about an appraisal that was completed on one of her listings. The appraiser (from a neighboring county) arrived at a value almost $45,000 under the contract price. She asked me if I could take a look at the appraisal and provide any insights that I might have.

It’s not unusual for values to come in lower than the contract price; and we all know that value and price are two separate things. However, there was such a large discrepancy, it warranted a closer look. After reviewing the appraisal, I did notice some issues that were of concern.

I recommended that the she ask for a Reconsideration of Value. A Reconsideration of Value is a formal request submitted to the lender asking their appraiser to consider additional information and/or sales data that might aid the appraiser and cause them to change their opinion of value.

Here are the steps that I suggested she take:

  • Go through proper channels.  The appraisal is the property of the Lender who ordered the appraisal.  You will have to submit your request for Reconsideration of Value to the Lender, usually in writing.  The Lender will then decide whether or not the request has merit.  If so, they will forward the request to the appraiser for review and response.  Do not contact the appraiser directly.  Remember that the appraiser’s client is the Lender; not the agent, the Seller or the Buyer.  The appraiser can’t act on your request or revise his report without permission from his client, the Lender.  Please note that the Lender can use their discretion and may deny your request without even presenting it to the appraiser.
  • Practice the 3 “Ps”.   Be Proactive – initiate the request promptly.  Be Professional – don’t get bogged down in personally attacking the appraiser or his skills, present your case in a professional, well-supported manner.  Be Polite – appraisers are people, too.  Really, we are.  You will get further with your request if you simple practice good manners and politeness.
  • Support your request with good sales information and insights.  Simply saying that “the value is not high enough” will not cut it.  Be prepared to provide additional comparables and explain why they are more appropriate that those used in the report.  If you have comments about the comparables used in the report, be specific and detail exactly why the comparable used in the report was not the best one available.  If you work frequently in a certain market and have intimate knowledge of sales in the area, use that information to support your point.  “Comp 3 was a nasty divorce situation and they needed to sell quickly.” Or “Comp 2 is actually 500sf larger due to a finished attic that is not noted in the public records.” Good, well-supported information will go a long way.  And, if you are going to provide additional sales, make sure that they are truly comparable.  Don’t just look for sales that will support your price. The appraiser and the Lender will see right through that. If your property is 3 bedroom Rancher, don’t include the 5 bedroom Colonial as a comp, even if it is located across the street. They’re just not comparable.
  • Be Specific. If you want to know why the appraiser made or did not make a certain adjustment or did or didn’t use a certain comparable, address it directly and specifically in your request. “Can the appraiser explain why he only made a $5,000 adjustment for the subject’s inground pool?” Or “Why did the appraiser elect not to use the sale at XXX Main Street, one block away?”
  • Keep it Short & Sweet. Don’t write a novel. Don’t get emotional. Get to your point, present your case coherently and concisely, provide supportive information and then, move on.

I hope these steps will help you if you ever find yourself in this kind of situation. Should you ever need any assistance with contesting an appraisal or submitting a Reconsideration of Value, please feel free to contact our office. We will gladly do what we can to advise you.

The Coyle Group, LLC is a Residential & Commercial Real Estate Appraisal firm serving the Greater Philadelphia Region and New Jersey.  215.836.5500

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Agent Alert!

March 29, 2012 by Leave a Comment

AGENTS!  Spring is here and these warmer temperatures will only help to heat up the Spring Selling Season.  If you haven’t done so already, now is the time to take a hard look at your older listings and think about how they will compete in the Spring market.  Perhaps, it’s time to do a little Spring cleaning and meet with your Buyers to decide whether they need to “reposition” (re-price) their listing. 

You can bet this new crop of inventory will be priced to sell.  If you want to contend with these new listings, you need to have a competitive price.  Proper pricing is the key!

One way to test the market is to have a Listing Appraisal completed.  Now, having an appraisal completed on a listing is not necessary for all situations.  However, if you have a unique property or a stubborn Seller, a Listing Appraisal may be the way to go.

The obvious benefit is that a Listing Appraisal will provide you and your client with an unbiased, professional opinion of the property’s current fair market value.  Aside from that important fact, there are other benefits to having an appraisal completed on your listing. 

As an agent, having a Listing Appraisal completed allows you to still “be the good guy” and maintain your client relationship while adjusting your Seller’s expectations.  Unfortunately, some Sellers refuse to believe that their home has been affected by recent real estate trends or, perhaps, they feel that shag carpeting and pickled-wood cabinets are making a come back with Buyers.  Having an impartial appraiser look at the property could provide you with the insight and feedback necessary to help your Seller “see the light.”

A Listing Appraisal also gives agents and Sellers an idea of how a potential Buyer’s appraiser may view the property when completing an appraisal for mortgage financing.  This way you limit the chance of being hit with any last-minute surprises or having to renegotiate your contract price because of a Buyer’s appraisal.

If your listing falls under the FHA program limit of $420,000 for Philly region, having a Listing Appraisal can provide added benefit.  Some appraisers will actually perform an FHA-style inspection when looking at your property and incorporate their findings in their appraisal report (our office does this as standard practice).  This will give you and your Seller a heads-up on any potential FHA issues that may affect your Listing.  That information can be used to correct the problem, possibly eliminating future headaches, negotiations and wasted time.

So, what’s the cost?  Well, typically a Listing Appraisal will be in the $300-$450 range (sometimes more if the property is unusually large or complex).  However, if you think about it, this is a relatively small investment if it can minimize your listing’s time on the market.  Or look at it another way…would you (or your Seller) be willing to pay $300 if you knew that your listing could sell faster and that you wouldn’t have to waste weeks dealing with hidden FHA issues, negotiations and stress? 

Think about it…and have a great Spring!

If you have any questions about Listing Appraisals or any other appraisal related question, please feel free to contact our office at appraisals@coyleappraisals.com or 215.836.5500.

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The Importance of Listing Appraisals

February 21, 2011 by Leave a Comment

Last week temperatures in the Philadelphia area flirted with 70 degrees.  Spring fever was definitely in the air.  People were out and about; and for a day or two everyone forgot that it was still February.  It got me thinking about the upcoming Spring Selling Season. 

Traditionally, Spring is when the Philadelphia real estate markets start to shake off the Winter sluggishness and things start to pick up again.  However, I can’t help but think this year may be different.  Given accumulating inventories, high unemployment, impending inflation and the lack of a tax credit, the 2011 Spring Selling Season could be a challenge.  Sellers and Agents alike will need to rethink their marketing strategies and pricing in order to be competitive enough to attract Buyers.

Pricing will be the key this Spring. 

For Agents, this year more that ever it will be important to make sure listings are priced to compete.  Not only will you have to compete with the older listings that are out there, you will have to go up against fresh, new listings that will be priced to move.  If you haven’t thought about getting a Listing Appraisal, now is the time to act. 

More and more, Agents and Sellers are having Listing Appraisals completed to aide their decisions about pricing and marketing strategies.  They realize that in this market not only do you have to price a house to sell, you have to price it so that it will appraise, as well.  Other Agents (your competition) are getting Listing Appraisals.  Frankly, if you are relying on the same old CMA these days, it’s like bringing a knife to a gunfight. 

Aside from helping to price a house properly, there are several benefits to having a Listing Appraisal done:

  • Demonstrates to the Seller that the Agent is committed marketing the house effectively
  • Sets realistic expectations for Seller
  • Provides Seller with an unbiased opinion of how their home compares to others on the market
  • Helps maximize the asking price without overpricing or under-pricing
  • Can help identify potential problems, repairs or issues present at the house that may cause delays or make the sale fall through
  • Gives the Agent/Seller an indication of how a potential Buyer’s appraiser may view the property which could have an affect on the Buyer’s ability to obtain financing
  • Can help reduce days on market, resulting in higher selling prices and possibly eliminate unnecessary negotiations 
  • Saves time, money and effort

Selling a home can be a very emotional process.  Perhaps the most important benefit of a having a Listing Appraisal completed is that it allows Agents to maintain client relationships without having to be the bearer of bad news.  The Appraiser is the one to present any unpleasant or “bad” news to the Seller.  The Agent is there to aide the Seller with interpreting the news and devising a strategy to sell their home. 

Listing Appraisals can also provide some level of defense against issues arising from the HVCC Guidelines; namely, appraisers who are unfamiliar with your market, inexperienced appraisers and appraiser who may not have access to the best data for your market.  The Listing Appraisal will provide a benchmark against which any subsequent appraisals can be measured. 

So, as the Spring Selling Season begins to heat up, it is time to invest in your own success and that of your Sellers.  Get a Listing Appraisal from a Certified Real Estate Appraiser.  For $300-$450 depending on the size and complexity of the property being appraised, Agents and Sellers can get a solid understanding of the value of a property and use that information as a tool to develop the best pricing strategy possible for the property. 

For more information on Listing Appraisals please contact The Coyle Group at 215.836.5500.

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Mount Airy Trends

January 24, 2011 by Leave a Comment

Being located in Erdenheim, just outside the city limits, we are frequently asked to appraise properties in northwestern Philadelphia, especially Chestnut Hill, Mount Airy, Roxborough and Manayunk. 

The other day we received our first question for the Ask PAB! section of the site.  It was submitted by a local agent who works primarily in the northwest section of Philly.  She typically deals with entry level and first time buyers.  For that segment of the market, Mount Airy offers a great selection of housing options for her clientele, in a wide range of price points and design styles.   It has very appealing housing stock, access to transportation, shopping, proximity to Center City and the suburbs and very unique community atmosphere.  Her question was simply:

 “How have Mt. Airy twins and rows been performing over the past couple of years?”

Below is a chart of the sales of 3-4 bedroom twins and rowhomes in Mt. Airy from January 2008 through December 2010.  Click on the chart to enlarge.

The blue dots indicate the sales of 3 bedroom homes; the red dots represent the 4 bedroom sales.  Our sample produced 341 sales of 3 bedrooms and 105 sales of 4 Bedroom homes, in Mt. Airy, during that time period.  The green and yellow lines depict the linear sale price trends for 3 and 4 bedroom houses, respectively.

The trend lines indicate that both 3 and 4 bedroom homes are moving downward.  However, it appears as though the 4 bedroom properties are experiencing a deeper shift that the 3 bedrooms, which are riding a flatter trend.  This is likely due to the fact that there are fewer 4 bedrooms homes and, as a result, fewer 4 bedroom sales.  With a smaller sample, it is easier for a few sales to influence the trend.  Conversely, with a greater number of samples it is less likely that a handful of sales to move the trend so dramatically.

If you have a question about real estate markets and trends in the Philadelphia region, please visit our Ask PAB! page to submit your inquiry.

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FHA Protocols

January 19, 2011 by Leave a Comment

The FHA has a number of appraisal inspection protocols which must be followed by FHA Appraisers.  Agents and Sellers should be aware of these inspection protocols as they may affect the appraisal and upset settlement timelines.  These protocols are intended to assure a level of due diligence that must be performed by the appraiser in order to property assess whether or not a property meets the Minimum Property Standards set forth by HUD/FHA.

The Head & Shoulders Test – this standard simply means that when inspecting attics, basements and crawl spaces an FHA appraiser must enter the space to “head and shoulders” level, at a minimum, to allow for a proper visual inspection. 

Mechanicals & Plumbing – all of the homes mechanical systems and plumbing must be turned on and available to be tested by the appraiser.  A representative sampling of switches, outlets and fixtures must be tested.  The heater must be operational.  If temperatures permit, cooling systems must be tested.  Water pressure and temperature should also be tested.

If for some reason, the appraiser cannot access any of these spaces or complete any of the necessary system tests, the appraiser must contact the lender and reschedule another inspection of the property at such a time that property access can be made.

This is where Agents and Sellers have to be proactive.  Make sure that these areas are readily and safely accessible to the appraiser.  Have a ladder ready for the attic inspection if there are no drop stairs.  Clear the access to the crawl space and have a light available to light up those dark corners.  Remove any personal property that could block these areas from access and view.  Make sure that all of the utilities are turned on and are ready to be tested.

These simple steps will save time and money.  The FHA appraisal process will move more quickly without having to schedule unnecessary reinspection appointments; and the appraiser won’t have to charge a re-inspection fee.

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Manayunk, Philadelphia

January 3, 2011 by Leave a Comment

The Coyle Group - Manayunk, Philly

We’ve received a number of calls from real estate agents in the Philadelphia market, including Montgomery, Bucks, Delaware and Chester Counties who have been inquiring about our Listing Appraisal Service.  Many have asked to see some case studies.  We thought it was a great idea and will be posting Listing Appraisal case studies from time to time.

Our first Listing Appraisal Case Study involves a house located in the popular Manayunk section of northwest Philadelphia.

The agent called The Coyle Group to help revise the list price for the house.  It had been on the market for over 150 days and the showings had pretty much stopped.  The agent was hoping that an objective appraisal might help convince the Seller to lower the price to be more competitive and hopefully get the house sold.

One of our certified appraisers inspected the house, researched the market and prepared a report for the agent and Seller.  The appraisal results indicted that the house was priced about 7% higher than comparables homes in the area.  It wasn’t competing.The Seller lowered the price and the showings picked up, again.  The house was under contract within 10 days of the price change.  The contract price was within $2,000 of our appraised value.

To find out how TCG can help you with your listings visit our Listing Appraisals page

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