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How to handle a low appraisal as a seller in a sellers' market. - YouTube
Channel: Robert Garcia Realtor
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Hi, how you doing?
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Hope you're doing well.
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I know you're waiting for my weekly video.
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So this video comes now.
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Hey everybody here I am.
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So here's your weekly content
video, please do me a favor
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and subscribe to my channel.
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I will bring you the best content
you can imagine in around Montgomery
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county, Maryland, and Maryland and DC.
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How do you handle.
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A low appraisal in this kind of
market we're talking, we are in a
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seller's market, super competitive.
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We've never seen this kind of
competition even back in 2008.
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People were not being as
competitive as right now.
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So how do we handle this right now?
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So here are a couple things on how
you can handle the low appraisal.
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Let's start with this.
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Hopefully, if you are a seller and you're
selling your property, you are able to
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secure a really good contract right now.
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And hopefully does not have an appraisal
contingency, but let's say your, your
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contract that you're accepting has
an appraisal contingency, and now you
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have to deal with a low appraisal.
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So here's a couple things that I
need you to consider in order to
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overcome the appraisal contingency.
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Let's start with first thing.
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An appraisal contingency.
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It's a way for a buyer to justify
the price that has been negotiated
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between seller and purchaser.
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And it's also a way for the lender
to determine if the value of the
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property is right and they should
give the money to this buyer.
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So there is a appraisal laws built
into most real estate contracts.
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So if you have one of those,
then it's good to read the terms.
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If the appraisal comes low.
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So here are the options.
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As a seller.
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Number one, you can accept that appraisal
the way it is and not cont they not
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do any renegotiation of the contract.
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Number two, you can reject the appraisal
and ask the purchaser to make up
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the, a difference or covered the gap.
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And the last thing you can do is you can
void the contract completely, all done.
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Forget about it, divorce from each other.
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So what is it that you need to be doing
if you're dealing with a low appraisal?
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So some purchasers are
willing to put what is called.
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A gap coverage in an
appraisal contingency.
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So what it means is the following.
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Let's say you're selling your property
for $500,000 and your property
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escalated to $600,000 in price because
of the multiple offer situation.
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But then, then this buyer.
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That is going to win the offer
because of the qualifications,
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the money they're putting down.
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And so on, these buyers says
that they will give you $10,000
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above the appraisal value.
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That's the cop, that's the gap, um, clause
or gap coverage, depending where you are.
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They have different names.
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So walk with me, you now.
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So you sell the house for $600,000.
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You listed it for $500,000.
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So you increase a hundred
thousand in, in the sales price.
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Appraisal comes at $570,000.
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Now this buyer had an appraisal
contingency and now this buyer will be
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willing to go $10,000 above the five 70.
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So now your final sales
price is five 80, not 600.
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So that's one way to use
and take advantage of these.
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If you're on the seller's side, now you
can also reject it as I said before.
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And if you reject it completely,
that means you have to put
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the house back on the market.
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Keep in mind that if you're working
with an FHA or VA loan, there is a
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chance that that appraisal may stick
with the property for six months.
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So check with your real estate
agent, the type of financing that
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you will be working with on the
buyer that you will be accepting.
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The other thing is that you need to keep
in mind is that if you counter back to the
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buyer, then that's when that gap clause
can come into effect, but you can also
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renegotiate the terms of the contract,
meaning that, okay, you now have a five
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70 appraisal and a sales price is 600.
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Maybe you guys wanna meet in the middle.
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With the buyer.
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So you will reduce the price.
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$15,000.
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The buyer will come up at $15,000
higher that in my opinion is better
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than using the $10,000 gap coverage
that, um, it is always used.
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Now you can also insert the cluster.
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It says that if the house doesn't apprais.
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That both parties agreed to me in the
middle of the whatever gap it comes with.
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So those are different ways you can do it.
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You can also request to do
an appraisal on your own.
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You can fight the appraisal back and
just get your own appraisal report.
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It's probably gonna cost you
six, $700 to get one done.
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And you just then go back and
try to convince the lender.
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That the price that the appraiser they
hire it's wrong and your price is better.
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Now that takes longer.
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It's a little bit more consideration.
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And it's the lender.
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The one that will say, uh, if they
will, uh, honor that or don't.
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So just keep that in mind to start
the things that you have to handle
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and, um, work around when you're
dealing with low appraisals.
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Remember.
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This channel is not about sales pressure.
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Just education today.
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I'm here in Rockville, Maryland.
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Uh, the red gate golf
course is a beautiful place.
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So stay tuned.
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There's another video coming up next week
to talk more about real estate and live
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all around the Washington DC Metro area.
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Take care.
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Bye-bye oh, don't forget to subscribe.
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Bye.
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