INSPECTION & APPRAISAL INFO

After we get a signed offer we usually have 2 hurdles to get past to close on the deal

1. Inspection:  The inspection is usually ordered immediately upon signing a deal. The inspection is usually done within the first week after the sales agreement is signed.   Typically, in years past the seller is rarely at the inspection, usually it's the buyer, inspector and buyer's agent.   

However, I find some inspectors are on a power trip pointing out every little thing (this is their job) but in many cases the inspector puts a great deal of fear into the  buyer. If it's a first time home buyer, sometimes they freak on small things and kill the deal.  Sometimes too the inspector is quoting crazy high prices to repair items like furnace, windows and many other things. The net result is the buyer walks...

What to do?   BE PRESENT FOR THE INSPECTION & APPRAISAL.  I don't mean follow them around the entire time but perhaps show up at the end to address any issues right off the bat. If you as the seller want to be there the entire time, that's fine too, it's your home.  Being present enables you to discuss any possible issues in my view. NOTE: It may make the buyer's agent uncomfortable but we aren't concerned about that. We're concerned about addressing issues from the get go.

2. Appraisal:   AFTER the inspection is done and all parties agree that it is then it's on to the appraisal.  Again, in past years the seller is not there. However, these days with banks sending appraisers out that may or may not know the area it's best you as seller are there for the appraisal.  I would recommend creating a Word doc with the features and all of the improvements with costs on this paper and hand it to the appraiser. I would discuss it too so the appraiser confirms the square footage of your home, bedrooms, baths, everything. Again, this heads off any inaccuracies from the appraiser.  Remember, they want to get in and out as fast as they can and many time overlook things.

So, if you really want this to work be present for inspection and appraisal. After that it's clear sailing to closing!

What If The Appraisal Comes In Low? (4 Options for Michigan Sellers)

What If The Appraisal Comes In Low?

This is still an all too common thing.  Most homes require bank financing. All lenders will require an appraisal on your home to verify the collateral of the home being sold.  You’ve most likely passed inspection so the final hurdle prior to closing will be the appraisal.  What if the appraisal comes in less than the agreed upon sales price?

Lenders always base their loan on the LOWER of the sales price or appraised value. So, unless otherwise agreed upon between the buyer and seller that appraised value becomes your new sales price.

Your choices

1. Take the appraised value as the new sales price so you can close. 
2. Negotiate with the buyer to meet somewhere in the middle between the appraised value and the previously agreed upon price of your home. This is the most common solution. HOWEVER, the buyer will need to have the funds available AND want to do this. In a situation where the buyer isn’t putting much down like FHA the odds are they do not have the additional funds to meet you in the middle somewhere.
3. Stand firm on your agreed upon price. This does not work very often. In your mind as a seller you’re thinking the sales price is what they agreed to. However, in the buyer’s mind they have a professional who says the home isn’t worth that. Why would anyone pay more for something than it’s worth?  A valid question. So, if you attempt to hold the buyer to your previously agreed upon price they may walk then you’re back to square one finding a new buyer.

The bottom line

If the appraisal comes in low that becomes the new price unless both parties agree to modify the sales agreement. So, there would need to be an “Addendum” typed up where both buyer and seller agree to the new price.  It’s a poker game and depends how bad you want to sell and risk losing the buyer to negotiate them back up to or near your previously agreed upon price.