Profile picture for jhrebik3

What is an agent's responsibility to help a seller prepare for the appraisal process?

What is an agent's responsibility to help a seller prepare for the appraisal process? Is an agent required to know and/or disclose that higher than "normal" closing assistance may negatively impact the appraisal? Should an agent take extra precautions in the appraisal process now that there is such a large issue with low appraisals? Thank you!
  • November 23 2013 - Baltimore
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Answers (13)

Profile picture for CallTheSisters
When the offer came in the agent should have discussed with you whether or not it appeared accepting the seller assist would raise the price beyond current comps.  You should have known that before you accepted the contract.

An agent should be familiar enough with the current comps in the local market to predict within reason whether or not the sales price will appraise or not. 

We can be blind sided by conservative appraisers.  You do not know who is going to do it. There is not way to safeguard against a low appraisal except keep the sales price within current comps.

Is your agent just the sellers agent or are they also representing the buyer?  That makes a difference as to how they can advise you.  A dual agent cannot be as pro-active for you as an exclusive sellers agent. 
  • November 24 2013
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Profile picture for Donna Phelan
A good Listing Agent always has the appraisal in mind and will advise the seller regarding the appraisal process when determining the list price, negotiating offers, preparing the property for the appraisal inspection and providing comparable sales to the appraiser for review.
  • November 24 2013
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Profile picture for steveh100
As a professional realtor, there is not a lot we can do for the appraisal process. In the past I've always brought past sold listings to the property where the appraisal is being done. I do this just in case the appraiser is not familiar with the area and the housing market within. So I bring comps if they don't have enough. I also make sure that I look up comps and see that we are getting the best appraisal.
  • November 23 2013
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I'd be interested if agents in any state have a "responsibility" to "disclose" anything of the sort. Here in the Great Pacific Northwest, it is "normal" for sellers to pay 3% is closing costs. Maybe not usual, but not abnormal or uncommon. 
  • November 23 2013
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Profile picture for amandathomas
I guess some agents see their responsibilities as very limited in the process. This might be a great question to use on listing agent interviews. :-)
  • November 23 2013
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To let the seller know when the appraiser is going to be at the home.  
  • November 23 2013
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Profile picture for amandathomas
I agree with wetdawgs... sellers who permit buyers to roll in closing costs should do so with caution. As they say, no good deed goes unpunished. This is especially true when the 'help' a seller agrees to give a buyer comes back to bite them on appraisal.

A strong listing agent will work to manage expectations up front, in terms of market tolerance for price. If a home presents with a legitimate reason to be valued at a higher price than its neighboring comparables (upgrades, improvements), an accounting of the elements which make it so should be included with the listing, and provided to the appraiser in advance. Note that the appraiser must work within the parameters of his profession, and won't be able to add blanket value adjustments based on the seller's report alone. The market must justify the price. Any overage becomes a buyer's burden, and point of contention in negotiations.

In instances where a buyer brings a competitive price to secure the property (e.g., multiple offers, hot seller's market), the listing agent could also provide the appraiser with copies of offers received showing the 'market demand' at the contracted price. 

It is customary for appraisers to receive a copy of the sales contract, and to have awareness of the sales price and amount of seller concessions.

Neither party can be 'forced' into solving for a failed appraisal. In the event that the appraisal come in unreasonably low, the listing agent should contest it.

If contesting the appraisal leads nowhere:
  1. The buyer can make the larger down payment to meet the contract price
  2. The seller can lower the price to match the appraised value 
  3. Both parties can negotiate something in the middle
  4. The buyer can solve by putting less money down on the mortgage note
  5. The buyer can switch lenders and have a new appraisal ordered (only recommended if you believe the 1st was a lowball appraisal, and providing that the buyer is also willing to switch financing types -- VA, FHA, and USDA follow the property)
  6. The buyer can terminate under the third party financing addendum (Texas)
A seller and listing agent should discuss these options in advance if they anticipate appraisal issues, and be careful about offer selection and negotiation so that all parties may benefit from a smooth transaction.
  • November 23 2013
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Seller paying closing costs for a buyer has absolutely no impact on the value of a property, which is what an appraisal is. The appraisal is just a justification, to the lender, that the purchase price is within reason for the house at that time in the current market. I the buyer is getting closing cost help from a seller it has no bearing on the appraisal value arrived at and the appraiser would not even be aware of it most likely. They will know the purchase price and must meet it, but they won't know much more about the offers financing.

The only way closing costs, being paid by a seller, will have an impact on the price of the house is if the purchase price is increased to cover the closing costs being added to the price. In other words these are all equal to a seller:

$200,000 purchase price - no closing costs paid

$210,000 purchase price - $10,000 closing costs being paid by seller

$205,000 purchase price - $5,000 closing costs being paid by seller

Those are all the same to a seller, BUT the increased purchase prices that cover the closing costs can make meeting the appraised price more difficult and might make the appraisal too low if it can't be enough to cover the costs being paid by the seller for the buyer.


tim

And I agree with Mr Dawgs. I dislike closing costs paid by a seller and I can't remember the last time I wrote an offer with them, but I know many do for 1st time buyers.
  • November 23 2013
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What do you mean by "higher than normal"?
  • November 23 2013
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The agents first responsibility is educate the seller in terms of the appraisal process. They need to have an accurate assessment of their homes value based on comparables that the appraiser will most likely use. This is to assure the appraisal will be close to the selling price.
  • November 23 2013
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The agents first responsibility is educate the seller in terms of the appraisal process. They need to have an accurate assessment of their homes value based on comparables that the appraiser will most likely use. This is to assure the appraisal will be close to the selling price.
  • November 23 2013
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Profile picture for wetdawgs
If you are selling your home and have received a purchase offer, I hope your agent spent time discussing every aspect of the offer including the potential impact of the buyer asking for help with closing costs.     I'm an old curmudgeon and wish that all sellers would reject the request for closing cost assistance, but I'm sure I'll be pounced on by professionals for saying that.

  • November 23 2013
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Profile picture for Jesse Storm
NO the appraisal is the appraisal it's just one person's judgment on what the house is worth based on market conditions. You should have disclosed the seller's help and numbers when you took the listing. So this should be a known fact and if you did comps for the home at the time you presented the offer if the house has been on the market for a long time. Then you seller should know that if they sold there home at a higher then normal level that the appraisal might come back low. 
  • November 23 2013
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