A good friend and client of mine (I’ll call her Kate) was putting her mother’s property on the market. Her mom had passed away about six months ago. Kate contacted a realtor she had bought and sold several homes with. The experienced realtor gave Kate a fair market value of $650,000.00 for the property. Kate did not list the property at the time. She was getting it ready for sale.
One Saturday afternoon Kate was at her mother’s house doing some touch up work when a family pulled up, lost, and looking for a tag sale. They started talking and after an hour with the family (we will call them the Brady’s), they offered to buy the Kate’s mother’s home for $610,000.00. Kate thought this was fair. She would not have to list the home, it would be a quick sale. $610,000.00 was about what she would have netted and the Buyer would be getting a sweet deal. Everybody was happy.
I sent out contract to the Brady attorney but because there were no realtors involved, it was harder to move the deal along than normal. The Brady’s (a first time home buyer) didn’t realize they had to put down more than 1% as a down payment, they lived in another State, and their attorney was from another area – little hiccups but nothing insurmountable.
One day, I got an email from the Brady’s attorney explaining that the bank appraisal came in at $570,000.00. That was $40,000.00 less than the agreed upon price. I showed a copy to another appraiser who told me in his opinion the appraisal was too low. He would have done things differently. He would have given more of a value for the swimming pool and would not have reduced the value of the home compared to another home on the block that sold for $629,000.00. Without a realtor, Kate faced the difficulty of not having comparables to fight the appraisal.
Kate’s choices now are to 1) accept $570,000.00 or 2)try to fight the appraisal- which will not be easy or put the house back on the market. From my understanding, the unspoken word is that an appraiser doesn’t want to sink a deal for a few thousand, so finds ways to kill the deal; in this case he brought the price down $40,000.00. I can’t help to wonder if this happened because it was a private transaction…