Hello all ye fair Phoenix Real Estate Guy fans. I am not he. Don’t worry, though, Jay’s heart is doing much better and I hear he’s even occasionally encountering some green, leafy things on his plate now. We’re all happy he’s healing well and has seen the nutritional light. But, you know, he’s pretty busy with the new job and all.
I’m Elizabeth, from over at Real Estate Tangent, and I plan to show up here to visit at TPREG every once in awhile for a little learning and a little obnoxiousness. Because those two are what I do best.
(Make sure you follow Elizabeth @ECnewlin)
Today, in the Tangential Learning Corner, let’s discuss the phrase, “It didn’t appraise.”
Let me set the scene for you:
You’ve seen 36 houses in the last 3 weeks. You’ve made offers on 7. Each offer has been outbid or completely rejected because it wasn’t a cash offer 10% over asking price. You’re exhausted, sweaty and disillusioned. You’re living with your in-laws until you find a new house and you haven’t gotten laid in at least a month. You are the definition of desperate.
Another house comes on the market that fits all your criteria. You dash to the house to meet your Realtor 8 seconds after it’s listed and have to stand in line behind 7 other sets of buyers waiting to see the house. But the house… is perfect. The house is just what you want. It’s better than the others you’ve put an offer on and it’s even listed 15% lower than you’re prequalified to buy at.
You: We need to write up an offer. NOW. Max out our prequalification. Write it for as far over asking as we can go. This is THE HOUSE.
Your Realtor: OK, but I just want you to be aware that I’m worried at that price, the house won’t appraise…
You: (WTF is he talking about ”˜won’t appraise’? Like the appraiser will refuse to come to the house because I’m such a ridiculous high roller? Or like the house will refuse the appraiser entrance because appraisals are for losers? Whatever Realtor-speak, dude. I just want the house.) Um, sure. I understand. I need to write the offer this high to get the house, right? I mean there’s been a billion people through. I just need to write it.
Your Realtor: Alright, I’ll put it together. I just wanted to warn you.
Cut to a week later.
Your Lender: I just got the appraisal back. It came in 10% under what you’re agreeing to pay.
You: Oh… so… I guess that means I’m sort of overpaying, huh? But there wasn’t any other way to get the house without doing that. So I guess I’m alright with it. Bummer, though.
Your Lender: I don’t think you understand. We won’t loan you more than the house will appraise for. You can still buy it, if you want, but you’re going to need to bring in the cash to bridge the gap between the purchase price and the appraisal PLUS the 5% you’re putting down.
You: Wait, WHAT??? That’s like (*intense mental mathification*) A LOT of money! I don’t have that kind of cash!
Your Lender: Sadly, I’m aware you don’t. I have access to your financial records.
It’s a catch-22. If you don’t offer high enough, you won’t get the house. But if you offer too high the bank won’t lend you the money you need to buy it. It’s a huge problem right now.
Your agent wasn’t trying to be obtuse; his Realtor-speak just got in the way and he didn’t realize you had no idea what he was talking about. It’s his fault, but it was also yours. Don’t be afraid to ask what in Holy Hank Heaven he is talking about when your agent stops speaking real English.
And when you hear, “I’m worried it won’t appraise,” STOP and get more information about what exactly that might mean to your deal BEFORE you spend hundreds of dollars in inspections and an appraisal.
(You can Follow @ThompsonsRealty here)