If you own a home or condo in Chicago, the fact that prices are increasing is great news. However, if you are considering selling your home or condo, make sure you realize the major challenge that a sellers market creates when it comes to buyer financing.
Rising home prices could increase the chance of a ‘short’ appraisal (where the appraised value is less than the contracted sale price). If prices are rising quickly or an individual home is much nicer than the surrounding neighborhood or building, it can be difficult for appraisers to find adequate, comparable sales (similar homes in the same neighborhood or condo building that recently closed) and defend the sales price that you and the buyer have agreed to.
Today, almost all buyers that are financing the purchase of a home will include a mortgage contingency in their offer. If the bank does not approve the loan at the terms previously agreed to, the buyer can walk away from the deal. A low value from a Chicago real estate appraiser is one reason this could happen. As the seller, you are then forced to re-list your home and find a new buyer. Back to square one…
Your Realtor Must Sell Your Home TWICE
Your home must be sold twice; once to a buyer and a second time to an appraiser who represents the buyer’s bank or mortgage company (unless it is an “all cash” purchase). In a real estate market with escalating prices, the second sale may be the more difficult of the two. For this reason, it’s more important than ever to price your home correctly. The challenge is to find the sweet spot between aggressive and overpriced.
If you’re considering selling, please fill out the Home Valuation form and Ryan will run a Comparative Market Analysis (CMA) for your home.
If the list price is still in question after speaking to a realtor and reviewing your CMA, a pre-listing appraisal might be a good idea.
John Tsiaousis, is a Chicago Real Estate Appraiser at Chicago Land Appraisals. He has been providing real estate appraisals in Chicago since 1999 and has over 10,000 appraisals to his credit. John says:
“Keep in mind that overpriced homes attract far fewer buyers, which means fewer and possibly no offers, wasting valuable time, money, and efforts while an under priced home can result in leaving substantial money on the table. Getting a pre-listing appraisal can help you and your realtor determine a true list price for your property as well as maximize your chances of selling quickly for top dollar.
A full appraisal may or may not be needed depending on what you’re looking for. Often times a more limited valuation or market analysis report is entirely appropriate, other times a full valuation may be necessary.”
Experts are projecting that home values could appreciate by another 5% or more over the next 12 months. Appraisals will continue to be an issue.
While a 1 or 2 percent difference in home value opinions may not seem like a lot, it could be enough to derail a mortgage and kill your sale.
Bottom Line:
Every home on the market has to be sold twice; once to a buyer and then to the bank (through a Chicago real estate appraiser). With escalating prices, the second sale might be even more difficult than the first. If you are planning to sell, let’s get together and discuss prices in your neighborhood/ condo building and the best listing price for your home. Contact Ryan
Realtor.com has a quick guide for how to prepare for an appraisal