Cut Appraisal In Gettysburg PA Area…

On October 7, 2010, in Uncategorized, by David Monsour

When the bottom started to fall out of the market in 2007 prices trended downward and have been falling ever since.  Remember that real estate is local so this doesn’t mean that real estate prices are falling across the country.  We seem to have a pretty steady trend of about 1% per month.  Falling prices create equity problems upon the sale of the home.  Real estate fees including transfer tax, commission are the big costs that face a seller.  When there is little equity in the house it makes it difficult to pay those fees and satisfy the mortgage at settlement.  To counter act this phenomenon sellers are simply adding those real estate fees to what they owe and putting their house on the market.

This plan seems reasonable to the sellers and against their better judgement most realtors will give this a shot “to see what happens.”  I have to admit I did this once and will not put myself, another agent, or a buyer in the position that we ended up in.  We had a ready, willing, and able buyer.  We had committed sellers and we had a clean contract.  When the appraisal came back low we wasted everyone’s time.  I knew the price was aggressive, but I thought we had a chance.  No dice! 

So today I’m on the other side of the transaction.  I have ready, willing, able buyers.  The agent has committed sellers and we have that same clean contract.  Just like last time the appraisal is not high enough to move forward with the deal unless the sellers are able to take less for the property.  Per my conversation with the other agent it’s not looking good.  The sellers have very limited equity.  We are already flirting with money coming to settlement.  Both buyers and sellers were very firm on their negotiations when we were completing the contract. 

This trend will continue to be a problem as long as agents allow their sellers to dictate the price.  I suppose the lesson to be learned here is that cost is not an indicator of value.  The value of the home can only be based on proof from other recent sold properties.  The price paid is completely irrelevant to the value of the home.  It’s an unfortunate truth but it’s reality.

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