Some see no difference between costly appraisal and free agent comps
Ilyce R. Glink
Q: I am writing in regards to a recent question in the column about starting to invest in real estate.
I am not surprised, but am slightly irritated, that when you advised this person to “put together a team of advisers,” you did not include an appraiser. If more and more buyers, investors and sellers would seek the advice of a residential appraiser, we might not be in the spot we are today with home values out of whack.
No, that is not the only answer; however, it would make more sense. It is sad that the “ethical appraisers” do not get more recognition. It seems as if they are just a small part in the transaction. No one understands the valuable part they play.
Well, that is if the “real estate team” lets them do their job and not coerce them into adding value where there isn’t any.
A: I agree that appraisers have been marginalized in the real estate process. But it never fails to amaze me when the appraised price comes in exactly (to the dollar) at the sales price.
Coincidence? Hardly. If appraisers have been marginalized in the real estate process, it’s because homeowners, buyers and sellers have no say whatsoever in the hiring of an appraiser –they just pay the bill.
The lender decides who will do the appraisal, and the real estate agent assists the appraiser in providing documentation that will make sure the number comes in at the right point for the deal to close.
Some lenders have pressured appraisers to come up with the “magic” number that will get the deal closed. They’ve threatened to withhold business if the appraiser doesn’t conclude that the property is worth what the buyer is willing to pay.
As an industry, appraisers haven’t been as vocal in standing up for their third-party independence as they could have been. In the meantime, why should home sellers pay for a separate appraisal when asking three real estate agents to prepare a comparative marketing analysis from the same data will yield virtually the same conclusion for free?
In terms of investing in real estate, which was the original question, I don’t know how an appraiser brings value to the process. When you invest in property, it’s important to know what the income stream will be and if that’s enough to carry the loan and other costs of the investment. If you’re getting a loan, you’ll pay once for an appraiser in order to get the loan approved. I’m not sure why anyone should pay for an appraiser before making an offer for a property.
But please feel free to make the case at the forum on my Web site.
Q: My husband is 67 years old and I am 63 years old. We have lived in our house for 35 years. We’ve had no mortgage for about the last 15 years. We want to buy in an “adult community”; we would put about $100,000 down with a short-term mortgage until we sell our home.
Should we wait to sell our home until the housing market gets better? Should we put our house up for sale anyway and see what happens? We could probably carry both houses for a year.
A: I don’t think you should go into the sale of your home thinking that it will take you a year to sell. While it’s smart to plan for that, I’d like you to focus on ways that you can sell your house relatively quickly.
The first thing to know is that while the housing market is tough in many places around the country, people are still buying and selling homes. If you want yours to be one of those homes that are sold relatively quickly, you’ll need to do a few things to your house to make it shine against the competition.
First, you’ll need to really deep-clean the house, inside and out. Throw away old, worn-out furnishings; pack away most of your knick-knacks, books and art work; and repaint your interior. Clean your carpets (or replace them with builder-grade carpet if yours are beyond salvageable), sand down your wood floors, and regrout the tile in your bathrooms. Talk to a couple of local real estate agents to see if it would be worthwhile for you to do a minor upgrade of the bathrooms or kitchen. New knobs, new cabinet facings (or painting or staining the original ones), and new appliances can make all the difference.
You may even want to hire a stager to come in and give your home a makeover. You’ll pay perhaps $1,000 to $2,000 per day plus expenses for the stager, but he or she can transform the way your home looks.
I recently watched a stager come into a townhouse and in the space of a day (plus $600 in materials) completely transform the space from something that was just “OK” to a home that made the real estate agent say, “Wow, this looks terrific!”
Outside, you’ll want to give your landscaping a professional makeover, and, depending on where you live, take advantage of the climate in any way you can. If you live in the southern half of the country, plant some new container gardens and put in some colorful annuals to help spruce up the yard. Consider repainting or tuckpointing the exterior of your home in order to make your home look as beautiful and as well cared for as possible.
Once your home looks as good as it can, you’ll want to price it competitively for your neighborhood. It should look twice as good as other houses priced in the same range, and your house should be priced at the low end of the spectrum. That’s as compelling a package as you can put together.
Then, you’ll hire an aggressive agent and see what happens.
On the buying side, you can certainly take out a home equity loan or refinance with a low-interest-rate, three-year adjustable-rate mortgage. You might even want to consider an interest-only loan, which will keep your payments to a minimum. It sounds like you have plenty of equity in the property, so repaying the principal balance isn’t a big issue for you at the moment.
I don’t think you should wait to move on with your life. And, you’ll never buy low and sell high in the same area at the same time. If I had to choose, I’d rather sell a little lower and buy a little lower.
I hope that’s what you’re able to do.
Copyright 2008 Ilyce R. Glink