Santa Clara Valley Living » Home Selling

Appraisals Coming Up Short

vbrasil — Wed, 05 May 2010 14:10:43 +0000

My last two listings sold quickly and sold over asking. My clients were ecstatic with the result, but there was still some obstacles left before the sale closed, namely the buyer’s property inspection and the lender’s appraisal. During the buyer’s property inspection there is always a possibility that the buyer’s inspector may find something that the seller’s inspector overlooked but as a seller you can mitigate the likelihood of this by doing your inspections before listing the property.

I always encourage the sellers to secure their own inspections before listing the property. These are crucial to ensuring a smooth transaction and avoiding any renegotiating during the escrow. Also the inspections may uncover some physical aspects of the property that could easily be repaired and that will improve the marketability of the home.

Appraisals are different. There is little agents can do to ensure that the home appraises at sale price. What makes matters worse is that we are experiencing the fallout from the mortgage crisis where there existed rampant appraisal fraud and extremely lax appraisers and appraising practices. As a result, the appraisal industry has been shaken up and tight appraisals and unwavering appraisers have become our reality.

The most frustrating aspect of appraisals is that they are extremely subjective. On one of my past listings I had a particular property appraised three times with three different appraisers and all three values were were considerably different. One appraisal came in at the contract price, one 10% undercontract price and another 5% under contract price.

How can appraisals have so many descrepancies and be so subjective you wonder? Well, appraisals come up short for many reasons. A lack of comparables, an updated or an expanded home in an area where a majority of the homes are not similar, many dissimlar tracts within a small area, characteristics of an area which may not be consistent among all the homes in the area such as schools, unique locations, flood zones, and the use of appraisers from outside the area who are unfamiliar with the local market. To make matters worse improved homes are seldom reflected acurrately on an appraisal report and the appraiser generally does not give adequet credit for the improvements or any superior characteristics.

A good example of these is swimming pools. Appraisers generally follow generic guidelines that may not reflect what buyers may value in a particular area. For instance, swimming pools in our area are generally seen to be a negative to buyers and affect the value of a property negatively. Nonetheless, appraisers will generall give a $10K premium to a property with a swimming pool. When you are comparing a home in the same neighborhood which sold with a swimming pool and your home sold $10K more, and the appraiser thinks it should be $10k less, in the end you have a $20K discreptancy.

The biggest issue is that buyers and seller’s see appraisals in different ways. In reallity, an appraisal is a third party assesment of value requested and used by the buyer’s lender to determine what the loan to value on the subject property should be. From the standpoint of a seller a low appraisal rarely affects reflect the subject property’s true value and can be highly scrutinized especially since the buyer chooses the lender. To a buyer, the appraisal is what the lender is willing to loan on the property and therefore can affect the buyer’s ability to purchase. The problem arrises for both buyer and seller when the appraisal discreptancy is large and making up the difference is too much for the buyer. This is when the seller faces a difficult decision; delay the contract to get a second appraisal from another bank, cancel the contract and sell to a different buyer, or renegotiate the price to a level that is acceptable to all parties and the buyer can secure the loan. The second option may not be favorable to the buyer and therefore the result may just be to cancel the contract.

So as a seller you must be thinking whats the point then of going through fixing up your home to sell or staging it if the appraiser is just going to treat the home like every other generic home in the neighborhood and not give me credit for the improvements. My response is you never can be too sure what will happen when you sell. You might be fortunate and get an appraiser who is more open and reasonable to your home’s value. Also depending on the seller and the circumstances surrounding the sale of your home, your agent may be able to convince the buyer to remove their appraisal contingency.

This is not recommend to all buyers and sellers, but if the buyer is confident in the home’s value and the price he or she offered and can make up the difference than this provides some assurance to the seller, but is not a 100% guarantee but I’m won’t go into the complexities that may arrise for fear of confusing or boring you to death.

The other factor and the most powerful and effective is choosing a real estate agent who knows the area, the values and recent sales, and making sure the agent is present at the appraisal. I for instance make it a point to meet the appraiser at all my listings and sales so that I can go over comps with him that I feel reflect the true value of the property. Its never a sure thing, but as long as the appraiser is open minded and your comparables are within appraisal guidelines then it should be no problem. The main goal is to prevent a lazy or over extended appraiser from using just any comps which may negatively reflect the property’s value.

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Risks of Buying or Selling Homes Without Permitted Improvements

vbrasil — Mon, 19 Apr 2010 21:50:02 +0000

I just closed one of my latest listings in Santa Clara. A small home in a quiet Santa Clara neighborhood. The homes in that particular neighborhood were designed with wall furnaces. Not very common in some areas but homes like these are still out there. One of the first things buyers often ask is what it would take to put in central heating and air conditioning.

Typically about $5,000 is what I tell them, but that will vary from home to home. Fortunately this particular seller had central forced heating, it was done by the owner prior to him and just this past year he replaced the furnace in the system.

One of the things the seller neglected to do is make sure a permit was taken out for the new furnace. What made matters worse is that when he bought the property he didn’t check to see if the previous owner had secured a permit for installing the system and to the surprise of the current owner he didn’t.

People don’t realize this but many cities in the area will request that permits be applied for and taken out for many repair items on a home even a toilet replacement in some cities including Santa Clara require the use of permits. Permits can be applied for at any city planning office and are relatively inexpensive. What permits are designed to do is ensure the that work complies with the city code and these codes are generally concerned with public safety. Regardless of who you hire the responsibility of taking out the permit falls with the owner. So as an owner you really have to make sure your contractor is doing things by the book and at the end of the job you’ll want to see that the permit was finalized.

You might ask yourself if its really worth the hassle of getting a permit. Maybe your friend works under a contractor and doesn’t have his license but he assures you he knows how to do the job and that you don’t need a permit. The reality is if you never do any significant remodeling and the work is inside a city inspector may never realize that you have unpermitted work and will likely never hassle you.

However, this problem will eventually haunt you when you sell the home or do a major home renovation. You see when you sell a home you have to disclose all the work that you have ever done to the home and whether or not you have documentation for the work or a permit. Easily enough you just disclose and say that you replaced the furnace and that you didn’t get a permit for the work. That should let you off the hook.

Some buyers and agents may think nothing of it and feel that permits are nothing but city government putting there hands in the pockets of residents. However, a good and responsible buyer or agent will see a bright red flag.

You see, if anyone down the road wants to do some work that will require a permit, maybe an addition or put in air conditioning or even replace the roof, (required in some cities) and the city inspector notices that you have a forced air heating system in your home but the city documents clearly say wall furnace. Well that inspector may want to have a closer look and before he signs off any work on your home he will want to make sure that the furnace is permitted.

Once the inspector concludes that the heating system was unpermitted he will request that you go down to the planning office and apply for a permit and begin the retro-permitting process. Retro permits generally cost a bit more than regular permits. Also to apply for a permit you need to get plans and submit them. So if you know how to draw up plans for HVAC, electrical and plumbing then that wouldn’t be a problem, but generally those are not skills that we all posses. So you convince your buddy to draw up the plans or pay another contractor to do that for you. You go down to the city planning office meet with the planner, he approves your plans, you pay the permitting fees and you schedule an inspection.

The city inspector comes out to the property and looks at the installation. Now if this installation was done relatively recently and by a qualified individual this may go fairly smoothly, but chances are that both those assumptions are false and the inspector has pointed out a number of violations and items that are no longer in code. Those items will have to be addressed and resolved before the inspector signs off on anything.

For something like the cost of repairing a furnace these items may not exceed $500 to repair. With more complicated issues like pools and additions these can get rather pricey. Don’t forget about the time you will need to take to get these matters resolved, time and money you could have saved if you had just got a permit or made sure the item was permitted when you bought the home.

Back to the story about the home I sold in Santa Clara. When the buyer discovered the central heating system was not permitted, immediately this set off a number of problems, especially since she was planning to put in an air conditioning system. In the end we had to contact several heating and cooling services to determine if there were any issues. Fortunately for my seller there were not too many issues with the current installation that had to be addressed and the buyer really wanted the home. In the end my seller agreed to credit the buyer $300 for the repairs, but the cost and time spent on getting the issue resolved could have been much worse.

So buyers and homeowners make sure you get permits for those items that require them, it will save you loads of hassle and costs in the future.Similar Posts:

Lynbrook Home Just Sold – 1015 Avondale Street

vbrasil — Wed, 25 Nov 2009 06:43:56 +0000

1015 Avondale Street, San Jose
Bedrooms: 6
Baths: 4
Sqft: 3,700 Sqft.
Lot: 11,000 Sqft.
Schools: Meyerholz Elementary, Miller Middle, Lynbrook High
Sold for: $1,345,000

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Mountian View Home Sold with Multiple Offers

vbrasil — Fri, 16 Oct 2009 01:32:43 +0000

Property Flyer: Lloyd Property Flyer

This Mountain View home just closed. It received 8 offers and sold over asking.

We went through this home to update it and do some necessary repairs to the bathrooms with had a shower pan and a tub with sub-floor damage.

After the improvements we staged the home and spruced up the landscaping. Please view the slide show and comment on what you think.

Lloyd Way

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380 Hillsdale Ave, Santa Clara – Westwood Oaks – Cupertino Schools

vbrasil — Sun, 20 Sep 2009 01:04:17 +0000

This is a great opportunity to buy a wonderful home in the desirable Westwood Oaks neighborhood of Santa Clara. This home features 3 bedrooms 2 baths, a spacious family room, 2 car garage, large backyard, and Cupertino Schools. The home will be on the market in 2 weeks.

Street: 380 Hillsdale Ave
City: Santa Clara
Bedrooms: 3
Bathrooms: 2
Price: $850,000
Size: 1,689 Sqft.
Lot: 6000 Sqft.
Schools: Cupertino Schools: Eisenhower Elementary, Hyde Middle, and Cupertino High

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3120 Membrillo Corte, Santa Clara – Sold with Full Price Offer

vbrasil — Thu, 27 Aug 2009 05:43:18 +0000

I just closed the sale on this Santa Clara home this past week. My clients have two children and their home was set up to be more conducive to accommodating the children and being comfortable than showing the potential beauty of the home. Like most sellers they wanted to sell for the highest price the market would produce.

They took my advice and were willing to do some important updates to the home such as granite counter tops in the kitchen and bathrooms. The existing carpet was fairly new and they went with neutral and updated paint colors. The home was built 20 years ago, and features a very functional floor plan with high ceilings, a spacious master suite and an open kitchen layout to the family room. All we needed to do was de-clutter the space and bring in some suitable furniture to make the home feel more luxurious and appealing through staging.

Meeting with my clients I presented my marketing plan and the range of prices that their home could receive in the current market. To achieve a price in the top range, I recommended that we do some simple updates like refinishing the hardwood floors, cleaning up the landscaping, and staging the home. They agreed and we went to work. I coordinated with the gardener, the handyman, and rented some furniture and personally made some accents to the home with artwork and accessories to give it a professionally staged look while still making it comfortable for the owners.

In the end we were able to sell the home for full price. Take a look at the slideshow to get an idea of the complete transformation.

Web Album

3120 Membrillo

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Forest Park Home – Santa Clara

vbrasil — Mon, 06 Jul 2009 14:22:17 +0000

Immaculate home in Santa Clara’s desirable Forest Park neighborhood. This home features 4 bedrooms 2 and a half baths with with 1810 Sqft. of living space and a spacious 8300 Sqft. lot. The home also features a newer roof, copper plumbing, dual paned windows, wall to wall carpeting, a granite kitchen, spacious back yard, updated baths, and much more.

Street: 3041 Pruneridge Ave.
City: Santa Clara
Bedrooms: 4
Bathrooms: 2.5
Price: $819,000
Size:1810 Sqft.
Lot: 8300 Sqft.

Property Flyer: 3041 Pruneridge Ave. – Santa Clara – Property FlyerSimilar Posts:

Home Staging and Selling in Santa Clara Valley

vbrasil — Wed, 03 Jun 2009 13:36:32 +0000

First off, I’m a huge believer in staging and use it in all my listings. After experiencing the difference first hand, selling an expired listing that was on the market for 5 months in just 1 week, I knew that if you are selling a house you need to have it staged. With that said I incorporated it into my listings and provide the service free to my listing clients. I invested in a storage locker and took staging courses and trained to learn the art of staging. If you are considering selling you need to read this article about staging.

When a house goes on the market homeowners and realtors do everthing they can to ensure the property looks its best. But it takes more than a colorful throw and pillow to disguise a saggy old sofa, or any other flaws the home might have. That’s where a good stager comes in. Stagers are professionals who come into homes or apartments for sale and style them with furniture, artwork, and other decor items to maximize the property’s appeal to potential buyers. More than just redecorating, staging appeals to the psycohology of the buyers by helping them see the property as their home, as opposed to someone else’s.

While staging services used to be the sole domain of those with multi-million dollar mansions to sell it is now affordable for homeowners across the spectrum.

Staging is an investment that not only helps sellers get top dollar for their property, but can cut the time a house spends on the market in half. Currently the average number of days a house in Santa Clara County is on the market is 120 days, my staged homes are selling within a month.

: Staging Before

: Staging After

There are four objectives of staging a home.

DEPERSONALIZE

It’s a misconception that ta wall full o ffamily portraits will create warmth. Its so important to deperonalize the home. When you walk into a model home, you don’t feel like you’re in someone else’s space. That’s an uncomfortable feeling, that you’re invading someones space and looking at their persoanl things – persons photos, personal collections, and kind of personal items in a bathroom, trash cans. Anything that says ‘someone lives here’ with a big red flag, like toilet bowl brushes or bath mats on the floor, we put away prior to showing the house.

REVITALIZE

My goal when staging a house is to create a very warm, inviting and updated space and environment, so the home doesn’t feel like someone has lived there or for 30 years and feels old and dreary. I want it to feel bright, fresh, and clean, ready for someone to move into immeadiately.

VISUALIZE

A lot of homes have unusual floor plans so when I come in, it’s my challenge to make the home make sense to a buyer. Where does it make sense to sit and watch TV, where are the kids going to do their homewor? I consider these factors when I’m planning the staging and the furnishings.

FUNCTIONALIZE

For me it’s not just about putting furniture in the house and making it look beautiful, it’s really about making the space functional for the buyer, and makeing the best use of it for the way we live today not 30 years ago. The buyer may never live the way I staged the home, but it makes sense when they walk in and it appeals to them.

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