Friday, August 23, 2019 / by Barry Owen
The Appraisal is the final hurdle!
Unfortunately, it is also the least predictable.
Because the Middle Tennessee real estate market is so fluid (Rapid appreciation and low inventory), this can be tricky.
Another complicating factor is the possibility that the assigned appraiser might not have deep knowledge of the subject neighborhood.
This is a by-product of the depression last decade . . . One of the most scrutinized aspects were the appraisal practices, and there were suspicions by the Federal Regulators that appraisers and Lenders were "colluding" to drive appreciation higher. The result was a Federal requirement that there be no direct contact between the appraiser and the Loan Originator . . . all appraisals would be required to be ordered through a 3rd party "Appraisal Management Company".
One of the unintended consequences of this new arrangement was this potential for an appraiser being assigned to appraise a property not in that appraiser's area of expertise.
All of this to say that, until we have a satisfactory appraisal, we do not rest.
Other factors (for some kinds of loans) relate to the condition of the property, septic system capacity, Living Square footage measurement . . . When the appraiser's Living Square footage measurements differ from the stated (disclosed) numbers, there is great potential for complication/conflict.
The appraiser's opinion of the value of the house may (almost certainly will) differ from the Selling price. This is not a problem if the appraiser values the property at more than the selling price but is a very sticky situation if the appraiser's value is less than the selling price.
And finally . . . NO ONE can control WHEN the appraisal will show up depending on how busy that particular appraiser is at the time of the order.
All of this to say that we pay VERY close attention to this appraisal process until we have acceptable appraisal report in hand.
When the Appraisal report shows up, it goes first to the Lender who will immediately forward it to the Buyer.
If it satisfactory, there is no action required . . . we move towards closing.
It the appraisal is not satisfactory, the Buyer (Buyer's agent) "shall promptly notify the Seller via the notification form or written equivalent notice. Buyer shall then have 3 days to either:
1. waive the appraisal contingency OR
2. terminate the agreement - Upon timely notification, Buyer is entitled to a refund of the earnest money.
In the event buyer fails to either waive the appraisal or terminate the agreement as set forth above, this contingency shall be deemed satisfied.
THIS is an "all hands on deck" scenario!
The Buyer and Seller could agree to amend the selling price down to the appraised value.
The Buyer could increase the down payment to absorb the shortfall.
It is incumbent upon the Buyer to terminate the agreement or remedy the shortfall within the 3 days.
Rest assured, your Vital Few REALTOR of Pareto Realty is well equipped to handle this scenario professionally. Our focus is on doing whatever it takes (legally and ethically) to keep this transaction alive so Buyer can buy THIS house, and this seller can move on.