The Best Place to Find Your Home RE/MAX of Michigan - Janet McNamara

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Understanding the Appraisal Process to Leverage Your Offer

In today’s market with many homes selling over the asking price it is important to understand the appraisal process and how it can be used in an offer to make it stronger and more competitive. Appraisals come into play whenever the purchase of a home is financed by a bank or other lender. The purpose of the appraisal is to provide an independent opinion as to the value of the home. According to Sara Bos, Mortgage Lender with Grand River Bank, “An appraisal documents that the real estate is appropriate collateral and determines whether the value of the property is enough to support the lending decision.” She notes that it is important to work with a bank that uses local appraisers, who know and understand the local market, in order to garner the best and most accurate property value. 

In order to determine the appraised value of a home, the appraiser compares the subject property with similar homes that have sold recently in the same area. Relevant information includes, physical, legal, and economic characteristics. It should be noted that not all characteristics of a home are necessarily relevant and may not affect the value of a home. Relevancy is determined by the appraiser. 

The best case scenario is when the property appraises for more than the purchase price. When that happens you can pat yourself on the back for being an astute buyer who got a great deal! However, if the appraisal is lower than the accepted purchase price you have three options.

  1. If the buyer has extra cash available, he/she can make-up the difference between the appraised value and the purchase price and bring those additional funds to the closing.
  2. The buyer and buyer’s agent can renegotiate the purchase price by asking the seller to lower the price to meet the appraisal or to contribute towards the difference. 
  3. The buyer can walk away from the deal and search for another home. 

Let’s revisit the idea that understanding appraisals can benefit the buyer when making an offer. In this market, with more buyers than there are homes for sale, a buyer can write an appraisal shortfall guarantee into their offer. This requires that the buyer has available cash to cover all closing costs plus the extra for the shortfall guarantee. Let’s look at an actual transaction that I closed recently. 

The house was listed for $220,000 and my buyers placed an offer of $240,000 with a $15,000 appraisal guarantee. This means that if the house appraised for less than $240,000 my buyers would make up the difference in cash at closing. In this case there were five offers and my client’s was not the highest. However, by speaking with the listing agent in advance I knew in advance that an appraisal short-fall guarantee was important to the seller. They did not want to be in a position to renegotiate the purchase price like in example #2 above. In this case the home did appraise at the full value of $240,000 which was amazing for my clients who not only won the deal and in the end did not have to bring extra cash to close. 

As always it is important to work with a professional realtor who understands and can guide you through the buying process. Please reach out with any questions about appraisals or any other part of the home-buying process. 

Summer is the New Spring


You might be surprised that realtors have been buying and selling homes throughout Michigan’s stay-in-place order, but because of restrictions and health concerns, sales have been sluggish in what is typically a busy spring market. Effective June 1st, restrictions on real estate activities were lifted by Governor Whitmer. This means a pent-up demand for selling and buying homes is about to emerge shifting our spring market to summer. 

Local mortgage lender, Sara Bos of Grand River Bank, has great news for home buyers. “Rates are still at all-time lows! The economy shows signs of stabilizing after being shut down around the world due to COVID-19. Through the next few months it looks like we will continue to see rates hover at some of their lowest in history.”

Thinking of buying?

Take advantage of historically low interest rates to enter the real estate market or upgrade to the home of your dreams. Lower rates mean home buyers can afford more house! 

Thinking of selling?

Take advantage of our low inventory to showcase your house and get top market value. Our local market currently has a “for sale” inventory of just 2.5 months compared to a balanced market of 6 months. This weighs heavily in favor of sellers who will face less competition and a back-log of interested buyers.

Either way, I am here and ready to meet all of your real estate needs.


Should I Stay or Should I Move?


Now that our stay-in-place order has been lifted and we have started to venture out into the world, a commonly expressed fear is the ability to fit into “real” clothes. Clothes are one thing but have you also considered whether your current home fits your new lifestyle?

After three months of staying-in-place many of us are realizing that our current homes do not necessarily accommodate our new reality. In the past three months our lives, habits and values have changed and so has the way we are using our living space. Although the stay-in-place order has been lifted in Michigan, for some, it might be months or years before returning to an office, a gym, or a normal social life. 

It is time to take stock and consider whether your current home can accommodate the home- gym you desire or one or more separate work spaces you need. Is your kitchen functional and enjoyable to work in on a daily basis? Are there any features you would love to have in your outdoor space for entertaining small groups of family and friends? Does your yard provide enough space and sunshine for your vegetable garden? These features are emerging as common priorities in today’s housing market. 

Housing is just one aspect of our lives that Covid 19 has caused us to reconsider and reprioritize. Perhaps a small renovation will give you the space and features needed to make your current home functional and comfortable. Or, perhaps it is time to take advantage of historically low interest rates and move up to a house that is works for your new family priorities. Either way I can help! Call me for trade recommendations or to find your new home.

The Internet Can’t Replace Your Agent

We live in the information age; the Internet offers advice on every topic and real estate is no exception. With more and more home buyers starting their home search online, they are bombarded with advice and information – it can be easy to think that you can learn everything you need to know just by reading articles online. The truth is your real estate agent does much more than answer your questions and open doors with a special key. A professional real estate agent will be there every step of the way. They have the experience necessary to navigate the complicated home buying process and solve common hiccups that present themselves in every real estate transactions. Your real estate agent is a local professional. They will start by presenting themselves to the buyer’s agent as someone who will work with them to see the transaction through to a successful conclusion. They have a network of professionals who will work as a team to help you through the process. These include such professionals as: lenders, title reps, escrow officers, transaction coordinators, home inspectors, contractors and handymen, among others. Most importantly, your agent is your ally in the home buying process. They negotiate on your behalf – armed with experience and understanding of customary charges, costs and terms. They will ensure that the price you pay for the home is fair for the condition and neighborhood. They will negotiate repairs, if needed and make sure you are protected with the proper contingencies. The Internet offers lots of great information, but the most important step you can take when buying a new home, is hiring a local professional real estate agent.  Their knowledge and expertise can't be found by reading an article or two online.
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