Thanks to HVCC requirements we now have this box that the appraisal report must neatly fit. No out of the box thinking allowed, it MUST conform all into a tidy package, no rough edges sticking out, no room for a little fluff on top. Just a plain vanilla box sealed to perfection.
Enter Real World properties. Homes are unique and not all are clones of each other, many points of difference and heaven forbid if they are located in an area where a move is rare .. no recent sales activity.
As REALTORS, we need to be able to quickly ascertain if a listing opportunity conforms to "the box" or if out of the box challenge will arise. As a professional you need to be able to relay to your clients the hurdles of the future if there are some that will need to be jumped.
A few in the box rules to be familiar are:
- Recent sales within the last six months.
- Location of sales - are they nearby or is a great distance required?
- Size of the home - are sales relatively similar in size or would large square footage variances be present for comparable properties?
- Line item adjustment - does your home have an improvement that other sales do not have that would make an across the board adjustment necessary for the amenity - i.e. pool? Underwriters hate this type of adjustment across the board!
- Bracketing - are there sales that are larger in size, smaller in size, sale above and below the sales price?
If you have a challenged property be sure that you try to make up for this obstacle with a strong buyer candidate. One that has a good down payment, great credit.
You may be able to do some great out of the box marketing and even nail the right value potential for the home but the package will close if a buyer's appraisal does not meet the rigid rules.
We would like to blame the appraiser (and there are some that do deserve the blame) but the reality is that limited data will procure a challenged report. A challenged report, even when the value appraises, most likely will face an underwriter rejecting it, calling for a review, etc.
Be prepared on the front end. Keep current with all market activity and when that offer comes in be realistic with your clients. This is called representation.