You got a great deal on the house from a motivated seller through your creative marketing strategies. Your team did an incredible job of renovating, landscaping, and staging the home and it looks absolutely amazing. The Realtor took beautiful pictures, and along with the description, painted an amazing picture of your most recent masterpiece. You get a full price offer within just a few days of it being listed and all is right with the world. That is, until the appraisal comes in $10,000 under contract price and cuts your profit in half.
As an active investor, you always want do what you can to maximize the return on your money, time and effort invested into any project. Understanding the appraisal process is a crucial step in ensuring that you get top dollar for your investment, and that you get it sold quickly so you can move on to the next deal. Unfortunately, too many investors take their eye off the ball as they get close to the finish line, and it can cost them dearly.
Let’s take a look at 5 great tips to ensure that you don’t make the same mistake, and that you get the maximum possible valuation for your property.
1. Make sure the house looks GOOD! This might seem like common sense, but once a property is under contract with a buyer, it’s amazing how many investors will begin to neglect the property. Make sure any minor repairs that may have been overlooked during the renovation get taken care of BEFORE the appraiser arrives. Just because the buyer may not have noticed or cared doesn’t mean the appraiser won’t.
2. Make sure the YARD looks good! – Again, something you’d think would be common sense, but investors oftentimes mentally “check out” once the house is under contract, but that’s a dangerous attitude to take. Appraisers are affected emotionally just as much as buyers are, and if they come to a home with an overgrown lawn, and weeds overtaking the once beautiful landscaping…don’t be surprised if it shows up in the form of a lower appraisal.
3. Keep it STAGED! – I am a huge fan of staging, and we have all of our renovation properties staged professionally. Even though we have to pay a monthly rental rate on the furniture after a certain point, we ALWAYS leave our staging in the house until AFTER the appraisal. We ALL feel better in a clean, staged home…and appraisers are no different.
He or she will also be taking photos of the home, which will be included in the report that goes to the underwriter for the buyer’s lender. A staged home will always look better than a bunch of empty rooms, and makes the appraisal much more likely to be accepted by that underwriter.
4. Make sure that the appraiser chosen for your flip is from the local area – The practice of choosing an appraiser from outside the area became much more prevalent over the last few years, and while it doesn’t make a lot of sense, it’s unfortunately not that uncommon. If you find out the appraiser is from a neighboring town, and therefore less knowledgeable about the local real estate values, don’t be afraid to try and dispute it and request a local appraiser.
5. Meet the appraiser at the property- In the same way that we meet the appraiser or BPO agent at the property during short sale negotiations to make sure the valuation doesn’t come in too high, we also want to meet the appraiser at the property during the resale valuation in order to make sure he has accurate data regarding the after repair value of the home. Be sure to bring along any comparable sales that you used during your pricing decision, so that the appraiser has as much data to support the price. MOST appraisers (unfortunately not all) want to help you out, and to appraise the property at or above the contract price. So, if you help provide them with accurate data, they are more than likely going to use it.
If you follow these tips, you increase your chances of a successful valuation exponentially. And when the appraisal process goes smoothly, you are one step closer to closing the deal, realizing your profits, & moving your capital into the next investment.
Do you have any strategies that you have used in the past to get a higher appraised value? Share your thoughts and opinions below, and let’s keep the conversation going!
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ASK the P.I.G. – How do I convince the seller to give me 30-45 days on a contract, when I said I could close quickly? What if they want me to perform inspections BEFORE I tie it up under contract? Check out the above video for your answer…
Annualized housing starts crossed the 1 million mark in April for the first time this year, but little of that improvement came on the single-family side—and that’s a serious problem, says the National Association of Realtors (NAR).
Measuring new homebuilding against employment numbers—which only recently recovered from their recessionary decline—NAR finds that historically, there is one new home built for every 1.5 jobs added to the economy. As of the first quarter, 32 states and the District of Columbia are above that ratio, meaning job growth has far outpaced new construction over the past three years.
“Our analysis found that a majority of states are constructing too few homes in relation to local job market conditions,” explained NAR chief economist Lawrence Yun. “This lack of construction has hamstrung supply and slowed home sales.”
The difference was greatest in Florida, Utah, California, Montana, and Indiana, where the ratio of new employment to housing starts is 3 or higher. Those areas, Yun warns, will continue to see “persistent housing shortages and affordability issues” unless homebuilding rises to match local job gains.
At the same time, NAR says price growth “looks to be manageable” in states where new jobs are near commensurate with new home construction, including Mississippi, Arkansas, Connecticut, Alabama, and Vermont.
With limited supply and rising costs already creating a serious challenge for homebuyers—particularly first-time buyers—Yun says it’s crucial for builders to step up production, even as they struggle with their own challenges, including rising construction costs and limited credit access for smaller firms.
“It’s critical to increase housing starts in these states facing shortage conditions or else prospective buyers may struggle with options and affordability if income growth cannot compensate for rising home prices,” Yun said.
Author: Tory Barringer
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The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury released the May edition of the Obama Administration’s Housing Scorecard  on Friday. The government report showed progress, noting growth in key indicators such as increasing equity and a rebound in the sale of new and existing homes.
According to the Federal Reserve, homeowner equity was up nearly $795 billion in Q1 2014, totaling more than $10.8 trillion. May’s figure was the highest level since the second quarter of 2007. Equity has continued to rise since the beginning of 2012, up 73 percent (nearly $4.6 trillion) through the first quarter of 2014.
“May’s Housing Scorecard shows that the housing market recovery is picking up after the harsh winter months,” said HUD assistant secretary, Katherine O’Regan. “More homeowners have positive equity, foreclosures continue their downward trend, and sales of new and existing homes are rebounding. While these are all good signs, it’s clear that we must remain committed to helping homeowners as they recover from the worst housing recession since the Great Depression.”
HUD cited figures from CoreLogic, which found that the number of underwater borrowers dropped 48 percent, lifting more than 5.8 million homeowners above water from 2012 to the first quarter of 2014. Despite first quarter gains of 300,000 homeowners who returned to positions of positive equity, approximately 12.7 percent of residential properties with a mortgage are still underwater.
HUD also celebrated new home sales, which were up 6.4 percent to 433,000 in April. Foreclosure starts continued on a downward slope, down 10 percent from the previous month and down 32 percent year-over-year. Foreclosures are the lowest they have been since December 2005.
Existing-home sales rose for the first this year. HUD cited a National Association of Realtors report that found existing home sales sold at a seasonally adjusted annual rate (SAAR) of 4.65 million in April, up 1.3 percent from March. However, existing-home sales are still 6.8 percent below the 4.99 million pace seen a year earlier.
“The standards set by the Making Home Affordable program have significantly changed the mortgage servicing industry,” said Treasury Acting Assistant Secretary Tim Bowler. “Treasury is committed to holding servicers accountable to these standards, and as a result has seen continued improvement by the largest servicers.”
HUD noted that foreclosure mitigation programs continue to provide relief for distressed homeowners—more than 8.3 million mortgage modification and other homeowner assistance actions were completed between April 2009 and April 2014.
HUD commented, “More than 2.0 million homeowner assistance actions have taken place through the Making Home Affordable Program, including nearly 1.4 million permanent modifications through the Home Affordable Modification Program (HAMP), while the Federal Housing Administration (FHA) has offered 2.3 million loss mitigation and early delinquency interventions through April.”
Author Colin Robins DS News
After the rollercoaster ride that has been the past six years, the national housing market is finally in a place that, at least for the moment, looks stable. Better yet, it looks downright sustainable, if the latest Trulia Price Monitor is to be believed.
According to Trulia, for the first time since July 2012, none of the 100 largest markets in May—anywhere in the United States—saw home prices rise more than 20 percent year-over-year.
This is the first sign of sustainability in the housing market in years and is, according to Trulia’ chief economist, Jed Kolko, a welcome change from the hyper-rebounding that occurred in some markets—particularly in the West, where asking prices rose by as much as 30 percent from 2012 to 2013—that had several economists worried that an accelerated boom/bust cycle was brewing.
“That’s a good thing,” Kolko said. “Extreme price increases create unrealistic expectations, encourage flipping, and might discourage some owners from selling if they expect big increases to continue.”
While May’s asking prices rose at their slowest rate in 13 months, they still rose 8 percent, which remains well above the long-term historical norm for home-price appreciation. Furthermore, prices rose 2.4 percent quarter-over-quarter in May, Kolko said.
At the same time, the number of markets with year-over-year price declines is also at a post-recession low. According to Trulia, the only metros where asking prices were down year-over-year were El Paso, Hartford, Albany, and Little Rock. This belies a healthy deceleration in booming markets, where prices had been rising unsustainably fast, Kolko said.
Another encouraging sign of a good economy, according to Trulia, is the fact that rents are up nationwide, but also not by any huge margin. Nationally, rents are up 5.1 percent overall from a year ago.
Apartment rents are up 5.8 percent, while and single-family rents are up 2.1 percent. As it has been in the home sales market, California’s coastal metros lead the pack in rising rent prices. Among the 25 largest rental markets, rents rose most year-over-year in San Francisco, San Diego, and Oakland.
Author: Scott Morgan, DSNews.com
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