Since the real estate boom and subsequent bust we've seen stricter lending standards to buy a home nationwide as well as Las Vegas and Henderson. One aspect of this has been a heavy scrutiny of appraisals. Appraisers today worker twice as hard, make less money and often their work is pulled in for review after they submit a report. The banks have remained on high alert-so to speak-with a heavy emphasis on capital preservation. They are not going to fund a transaction past a certain percentage of valuation.
Realtors in the Las Vegas sometimes see deals fall apart when the appraisal comes in light. Last year I had two properties come in with appraisals lower than contract price. The first deal fell apart and the second was renegotiated. In the first case the seller could not bring money to the table to close, while the second had plenty of equity and could lower their price to close escrow.
When an appraisal comes in below an agreed upon sales price, the parties involved must either change the contract to reflect appraised value, have the buyer/seller cover the spread or let the deal fall apart.
When I represent buyers in North Las Vegas, I like to take a pro-active approach during the appraisal process. Any comparable sale that I feel will support our contract price is provided to the appraiser beforehand. I also inform them of any updates or upgrades I feel will make a difference when computing value. I can tell you from experience that presenting this information prior to the appraisal is much easier than appealing one after the fact. It is rare that they get changed afterwards unless there are errors.
If the appraisal does come in light, it’s recommended you have your Las Vegas real estate agent inspect the report. At this point it’s up to your broker to perform their due diligence and examine the report for possible errors.
Many larger national banks work with appraisers who are not in necessarily in tune with the subtle nuances of particular communities like Aliante, Desert Shores, Painted Desert and so on. It’s important that you also look at the neighborhoods from which the comparable homes were pulled and try and spot variations that could make a big difference in price.
If you do find any mistakes you should ask your appraiser to address these issues immediately. If no action is taken you may want to speak with their boss or even with the underwriter of the loan. If errors were glaring I’d ask for a new appraisal altogether by somebody new.
If the low appraisal is substantiated it can disappoint both parties. Sellers now realize they will net less money than they originally thought. Buyers are concerned they’ll lose the house and have to start all over again.
At this point, it’s time to revisit wants and needs. Are the sellers ready to move on with their life? Are they able to sell at the appraised price or will they be short? I’ve seen buyers willing to split the difference, but the reality is most people don’t have the money to do that. Realistically the best option is for the sellers to accept the valuation if they are able and revise the contract to reflect the changes.