Understand the Process
Whether a first-timer or seasoned home buyer, your home buying and selling process can be as challenging as learning a new language. Before you make your move, it's important to first understand the steps involved and the buzzwords of the "deal" to ensure the smoothest transaction possible.
Your best source of information will be from your Realtor. The real estate industry and financing are constantly changing, so even if you've bought a home in the past the process may have changed. Friends and relatives are often well-meaning, but they may not have purchased or sold recently either and could be giving you inaccurate information.
So how does this work?
Get prequalified by a lender so you know how much you can afford and how much your payments will be.
Choose a Realtor who will represent you (ask about Buyer Representation). Your Realtor will have access to the Multiple Listing Service and can show you every house in town regardless of which agent or company has it listed.
Once you find a house you will make a written offer. When it's been completely accepted you are officially Under Contract!
Your Realtor will help you schedule inspections, deliver the contract to the lender and review the title commitment. There are a lot of things happening behind the scenes while you are under contract and your agent will be handling the details for you.
Once you've accepted the inspection, title commitment, and survey, and you have loan approval, you will be on your way to closing.
About a week prior to closing you can schedule utilities connections for the date of closing.
Closing typically takes place at the title company. When you go to sign documents, you will need to bring identification (usually your driver's license or passport) and your funds for closing. The funds for closing must be in the form of a money wire or cashier's check - the title company will not accept cash or personal checks.
How-to’s: What to do if your home doesn’t appraise at the price you want to sell?
Housing sales heat up and they cool down. When home sales volumes increase, house prices hold firmly or go up, and inventories decrease. Buyers and their banks tend to negotiate less.
When sales volumes decrease, home prices level off or decline. As inventories rise, buyers feel more confident about making lower offers.
However, it’s no longer that simple. Due to new banking regulations, your home must meet strict new appraisal standards that include examining home prices going back as far as one year.
If the housing market in your area is in a decline or coming out of one, appraisers are supposed to apply a formula to make sure that the current price isn’t overoptimistic.
Home sales may be increasing in your area, but for the wrong reasons. If your region has a high number of foreclosures due to factory closings or housing speculation, you may be in for a nasty surprise.
Just when you think you’ve sold your home, the buyer’s bank comes back with a property appraisal that’s less than the contract price. Your choice? Amend the contract to the appraised price, or lose the buyer.
But wait, you may have other options.
Other ways to keep the contract together
Naturally, the buyer is pleased at the option of getting your home for less, but you still have some advantages – your comparables (other homes that have recently sold and are currently on the market that are similar to yours) and the fact that the buyer wants your home and was willing to pay the contract price.
Challenge the appraisal
In some cases, banks use appraisal management companies that hire out-of-area appraisers, or they use low-cost appraisal products besides a full professional exterior and interior appraisal. These products include automated valuation models (computer-generated appraisals), drive-by appraisals in which the appraiser does not go inside the home, and broker price opinions (opinions of property value by professional REALTORS®.)
This is where your real estate professional really earns her stripes. As a knowledgeable person in your area, she can determine what kind of appraisal was used to arrive at the home’s valuation. If the buyer paid for a full appraisal and only received a drive-by, for example, that’s cause for the buyer to insist on a second appraisal, if they still want your home.
Your broker can also examine the homes that were used in the appraisal and determine if the comparables are truly similar or not. If not, you have a fighting chance.
1. Have your real estate broker provide an updated CMA (comparable market analysis.) It could be that new market information is available, such as recent solds that will help your case.
2. Hire your own appraiser. It will cost between $350 and $500. Banks do not have to use this appraisal, because it comes from the seller, but it can provide compelling evidence that the contract price is fair.
3. Prevention is the best medicine. If your contract falls through, make sure that your next contract protects both you and your buyer by insisting that the contract price must meet appraisal – a full-service interior and exterior appraisal by a licensed professional who knows your area.