HOW TO DEAL WITH A LOW APPRAISAL & SOME MORTGAGE OPTIONS THAT CAN HELP
The appraisal is the largest closing fee you pay upfront that isn’t refundable if the deal does not go through. In this episode I will be sharing some options we have in the mortgage industry to help you land on your feet if you do have a challenge with your appraisal. You will get tips on what you need to know BEFORE you order a real estate appraisal and how to properly deal with a low appraisal.
Glad you stopped by Real Estate Mortgage Shoppe for a visit. Please subscribe at www.JoGarner.com We would like to hear about your particular interest in real estate and how we can help you with YOUR real estate scenarios. You can also contact me personally at (901) 482-0354 and via email at jo@192.232.195.219
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Good morning Memphis! Thank you to those of you listening from California to Maine and from Alaska to Florida and in between. Thank you for working with me on your mortgage financing. You’re listening to Real Estate Mortgage Shoppe. I’m your host,Jo Garner, Mortgage Loan Officer. If you have a question, a comment or a real estate related conundrum, call the studio while we are live June 11th, 2016 at (901) 535-9732 or outside the Memphis area (800) 474-9732. Co-hosting today Tom King, appraiser with Bill King Company will be sharing some great 1. Tips during this show on what you need to know BEFORE you order a real estate appraisal and and 2. how to properly deal with a low appraisal. I will be sharing some 3. options we have in the mortgage industry to help you land on your feet if you do have a challenge with your appraisal.
Tom, most everyone knows who you are and how you help people using your appraisal expertise. Tell our new listeners a little about yourself and what you do as an appraiser with Bill King Company.
(Jo) When I first got in the mortgage business over 25 years ago, someone told me, “If you can solve problems, you can make money. The more problems you solve, the more money you will make.” The person that told me that has been absolutely right. A big part of problem-solving though is preventative preparation. If you want to buy a house, make sure you have an experienced realtor with a good reputation on your side—and a good mortgage loan officer too. Using experienced professionals can save you from making very expensive mistakes. If you do make a mistake, the experienced people you put on your team can help you mitigate that damage. One of the biggest closing costs fees you pay upfront when you are getting a mortgage to buy a home is the money you pay for an appraisal. I make a habit to warn you about certain repairs that an appraiser may notate in the appraisal that will have to be completed before closing or, in some cases, right after closing. If some of these repairs are cost-prohibitive to you as a buyer or seller, then now would be the best time to find out and not after you have spent the money on the appraisal. Here are some common repair items we see on appraisals that usually have to be corrected before closing, but sometimes following closing:
leaky roof, rotted wood, peeling paint, torn flooring, broken tile, non-functional plumbing, electrical or HVAC systems, drainage problems, holes in sheet rock, broken windows, foundational problems, termite damage, hazardous waste on property and more. Does the property you are going to purchase or refinance, have any of these conditions. How much will it cost to correct?
(Jo) I was talking with a radio listener a few weeks ago and he wanted to refinance his house and get quite a bit of cash out so he could do some fix-ups on the property. I asked him what type of fix-ups specifically. He said, “ Well, the upstairs bathroom needs redoing and so does the siding on the outside of the house.” When I asked him to clarify exactly what he would be redoing, come to find out he had ripped out the toilet and the shower from the upstairs bathroom. He had to replace some missing siding on the house because the wood was rotting behind it and there was termite damage (termites love moisture.) When I explained that the appraiser would probably require this to be corrected before closing since it was structural in nature, he reminded me that the reason he needed to refinance his house is because he needed the money FIRST before he could do the repairs. (Catch 22) In situations like this, sometimes the answer is to use a different type of loan, like a renovation and repair loan and not the standard mortgage product, or a temporary bank loan. If you have some input on this topic, call us now while we are live at 901 535-9732 or (800) 474-9732 or call me personally after this show at (901) 482-0354 (901) 482-0354 or email me at jo@192.232.195.219
(Jo) Let’s take a moment and talk about the mortgage rates, which can indirectly drive supply and demand of real estate. The prices on mortgage rates eased down just a little yesterday making yesterday’s rate the lowest since May 2013—over a 3 year low. But all of this could change with a big calendar event like Wednesday June 15th, 2016 when the Federal Reserve talks about their interpretation of the economy and what they intend to do about it. So, if you are someone you know has pulled the trigger on a refinance or a purchase loan, let’s look at some mortgage options that can make your life easier.
If you have a mortgage rate in the upper 4’s and you have over 10 years left on your mortgage, you might be very pleasantly surprised at how much I can lower your interest expense and even shorten the term to help you get rid of the mortgage sooner.
Call me personally at (901) 482-0354 (901) 482-0354 or email me at jo@192.232.195.219 or connect with me at www.JoGarner.com
Tom, you have over 40 years experience appraising real estate. As a realtor or a mortgage lender, how should I prepare my client for the appraisal? Tom’s notes:
Stay in the same area within 1 mile is best.
Use sales no older than 1 year
Use sales within a 20% range of square feet.
FORGET price per square foot
BE NICE if you are contesting the information on the appraisal. Being nice in your communication can go a long way in getting an appraiser to work with you.
2nd segment: It’s time for the Look Back Memphis Trivia Contest. Today’s trivia is brought to you by our own Tom King who is a Memphis history enthusiast. Our Look Back Memphis Trivia Contest is sponsored by John and Jennifer Lawhon of Lawhon Landscape (901) 754-7474 the Lawhons can help you plan your landscaping if you have a BIG, BIG project or a smaller project . The Lawhons are giving away a $25 gift card to the first person with the correct trivia answer. If you know the answer to the Look Back Memphis Trivia Question, call us on the air at (901) 535-9732. 800 474-9732
TRIVIA QUESTION: A restaurant in West TN got sued by a clown several years ago for use of a business name and the restaurant won the suit.
TRIVIA ANSWER IS : Bozo’s Restaurant in Mason, TN
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QUESTIONS ANSWERED BY TOM KING:
Q3 As a realtor or a mortgage lender, how should I prepare my client for the appraisal?
Q4: What are some different type appraisals that you do and what makes them different from each other? Estate sales, Divorce appraisals, cash transactions
Q5 Who orders the appraisal? Talk about the firewall between the appraiser and the mortgage companies?
The government regulations require mortgage companies to order appraisals through a third-party appraisal-ordering company so that the mortgage company cannot influence the value determination on the real estate.
The appraisal can be ordered directly by the home owner or estate sale coordinator if the appraisal is not for the purpose of acquiring a mortgage.
Q6 How can I properly challenge an appraiser’s opinion if the value comes in lower than what was expected? You can’t appeal the value on the appraisal, but you can appeal the validity of the information on the appraisal or the appropriateness of comparable sales used or not used. BE NICE in your communications when you are presenting your case to the appraisal to raise the price.
QUESTIONS ANSWERED BY JO GARNER:
⦁ Have you dealt with any customers who were surprised with an appraisal that came back with a lower value? What are some mortgage options that you can put in place to keep the terms workable for the customer?
If the difference is small, usually the seller will come down on their price to meet the lower value. If the seller is short meeting their absolute net profit by lowering the price, then sometimes renegotiation occurs and the seller and the buyer may agree to allow the seller to pay less toward the buyer’s costs. Sometimes the buyer agrees to pay the difference in the sales price and the lower appraisal value, but the buyer is normally not required to do this. They can walk away from the deal and get their earnest money back—but not their appraisal money spent and sometimes the buyer has spent money on a home inspection too which they do not get refunded. If the buyer has their heart set on a house and they have invested quite a bit on the appraisal and the inspection, they might meet the seller half-way on coming up with the extra funds to make up the difference between the price and the lower appraisal value.
As a mortgage loan officer, my expert assistant, Susan and I will sometimes get in a huddle with the realtors involved on the transaction and contest the information used by the appraiser if we have evidence that we believe was missed or skipped that could have resulted in a higher appraisal value. That’s where experience pays off.
If the difference in the appraisal value and the price is substantial, I will sometimes rework the loan terms on a different product and add in a little bit of mortgage insurance to allow us to increase the loan amount or the loan-to-value on the loan if needed. Other times I may combine the loan with an additional loan product to help my customer get into the home with the amount of move-in costs that still fits inside their comfort level.
Jo tells story about the appraisal in Collierville that came in $10k low on a house that had been completely updated in th kitchen and bathrooms. The appraiser used comparable sales to come up with the value that were NOT updated. The realtor representing the seller had done extensive research on that neighborhood and knew that there were other comparable sales of properties that HAD been updated . He put together a nice and respectful letter to the mortgage company pointing out the specific comps he felt the appraiser should use and why and I forwarded his letter to the third-party appraisal ordering company who then forwarded it to the appraiser who reviewed the appraisal again and raised the value by $8,000 dollars. Raising the value by $8,000 made the deal workable again for both buyer and seller and the loan closed without a hitch.
⦁ What are some methods you use as a mortgage professional to help your customers who are refinancing and get the appraisal value that comes in too low to allow them to get the loan amount they need ?
Jo tells quick story about a client who was refinancing two of her rental properties for the maximum cash out to pay down some other mortgage debt that had some not-so-great terms on them. One of her rental properties came in with a low appraisal but the other one came in much higher, so we lowered the maximum loan we could give her on the one low appraised property but raised the loan amount on the property with the high appraisal value. She got about the same amount of money cash out overall and that allowed her to pay down the other variable mortgages.
Sometimes on refinance loans, when the appraisal value comes in low, my assistant and I shop for private mortgage insurance that will cost our client the least amount of money overall, which allows us to take their loan back to the higher amount that they needed to accomplish their goals. Other times I might just switch to a different loan product that allows for a higher loan-to-value.
Other times, we have contested the information used by the appraiser to come up with the value if there are obvious errors negatively affecting the appraiser’s decision, such as not using valid and better suited comparable sales or if some material facts he documents about the house are not correct. (Jo tells quick story about the house in Illinois where the appraiser listed the square footage as smaller than the actual size of the house and listed the attic as a pull-down stair instead of the actual spacious walk-in attic. These are errors that we felt would compel the appraiser to raise our value, but, in that case he refused. The deal closed anyway but it was not a happy part of the loan process at all.
⦁ What do YOU do to prepare YOUR clients for an appraisal?
Tom, the appraisal is such a key piece of the mortgage process and it is the single most expensive closing cost item that is usually paid up front and not refundable even if the loan does not close. I have been on the borrower side of the mortgage table plenty of times myself to know how important it is to do your homework on a piece of real estate before plopping down the money to have it appraised.
Know the condition of the property you are about to have appraised. If the mortgage company is ordering the appraisal, they require the house to be in reasonable good condition. If it is not, the appraiser will mention specifically in the report items that may need to be addressed. Mortgage underwriters like to require these to be handled BEFORE closing. Some repairs are allowed on a case-by-case basis to be done AFTER closing , but money has to be set aside at closing and left in escrow until the repairs are made.
I do not hang my hat on the accuracy of www.zillow.com , but when it comes to houses in a cookie-cutter neighborhood where most of the houses are very similar and very close together, when it comes to www.zillow.com , usually where there is smoke, there is fire—it can be pretty close to the right value.
In the Memphis Shelby County area we have www.chandlerreports.com You pay about $50 and can get recent, fairly detailed information about houses that have sold like the targeted home which can help you decide BEFORE you pay for an appraisal what your odds are of getting the value you need.
Realtors are a great resource. They also have some recent information about what houses like your subject home are selling for and how long they stay on the market. I think you will find most realtors are happy to share their information without charging you a fee. The mortgage company will still have to order an official appraisal and use the assigned appraiser’s value and info about the house, but at least you can feel good about the fact that you did your homework before paying the money for the appraisal.
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REAL ESTATE TIP OF THE WEEK: (Jo-talks about some resources for trying to get an educated guess on the value of a home before paying money to get the official appraisal done.)
ANNOUNCEMENTS:
⦁ Talk Shoppe offers free education and networking to anyone interested in real estate or business. This Wednesday June 15th, 2016 Talk Shoppe will be presenting “The Source Does It All—We Change Your Life—professionals in home and office organization and estate sales too. Sally Baker presenting.
⦁ Talk Shoppe is free for the next 2 months thanks to our advertisers like Pat Goldstein, experienced realtor with Crye-Leike in TN and MS-the gold standard in real estate (901) 606-2000. Thank you also to Gwen Christensen of Builders Floors and Interiors ⦁ www.buildersfloorsandinteriors.com who can install your flooring at less costs to you than the big box stores (901) 382-2155. For more information about Talk Shoppe, go to ⦁ www.TalkShoppe.com
⦁ 2. To hear today’s podcast of the Real Estate Mortgage Shoppe and others, go to ⦁ www.JoGarner.com
-3. “MAKE YOUR PLAN, WORK YOUR PLAN. IF THE DEAL WORKS FOR YOU TODAY, DO IT TODAY.”
4. Attend the University of Phoenix Memphis Campus Career Fair on July 21st at 10 am.
For details, contact the campus at 901.752.2612
⦁ The Neighborhood Christian Centers and the Food Bank Mobile Market will be providing a mobile food market to families in need. NCC is seeking private and corporate partners to sponsor the Mobile Market each week and provide volunteers to package and distribute the food to our neighbors in need. For more information, donors and volunteers call 901-881-6013 ext. Development Dept.
⦁ ANNOUNCEMENT ABOUT DAVID LENOIR’S SHELBY COUNTY REAL ESTATE ROAD SHOW for more info contact Kesha Whitaker at ⦁ kwhitaker@shelbycountytrustee.com
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QUOTE CORNER:
Customers to their realtor. “You did a great job describing my house in the real estate ad. It sounds so appealing, I’ve decided to keep it.”
“My house isn’t messy. These are just obstacles I ‘ve put in place for any burglars that try to break in.”
John D. Rockefeller “The major fortunes in America have been made in land.”
REJOINERS:
⦁ Kim Miller of Arch Private Mortgage Insurance company, Nashville, TN and all over the country (615) 424-1500
⦁ Wendy Greenlaw Memphis Daily News ⦁ www.memphisdailynews.com
(IF we do not have one for Wendy, then please use Sally Baker, The Source at 901 258-4775)
⦁ Jeff and Heidi Ross, Showhomes Memphis ⦁ jeffross22@gmail.com (901) 361-7419
Transitional Music: “I Might Be Cheap” Rik Roberts ; “My Last Dollar” Dale Deacon Jones from the 1940’s –a 78 record from Tom King’s collection; “If My Nose Was Running” Money by Aaron Wilburn; “Memphis” by Johnny Rivers
ABOUT TOM KING, APPRAISER WITH BILL KING COMPANY (901) 487-6989
Tom is a well- respected and sought after appraiser in Memphis, Tennessee. He is a second generation appraiser with 40 years experience. He has been elected to the Memphis Area Association of Realtors Board of Directors three times.
Tom is a certified residential appraiser in Tennessee. He have appraised over 20,000 homes in his career. A graduate from the University of Tennessee with a degree in real estate, Tom is also a Certified Relocation Professional (CRP). Tom also has vast experience in dealing with the county and state boards of equalization and in valuations of property for tax appeal purposes. (901) 487-6989
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ABOUT JO GARNER-MORTGAGE LOAN OFFICER:
www.JoGarner.com (901) 482 0354 jo@192.232.195.219 twitter @jogarner
Jo’s job description: “As a mortgage loan officer, my job is to give my client the benefits they want from their financing terms—listening to my client and determine what’s of the most value to THEM– What is their comfort level on a house payment, how much are they comfortable paying down, what type of financing do they need to get the house they want to buy or refinance. Different clients have different priorities in life—some are buying their first home with very little down payment funds. Some are recovering from medical challenges, divorces or preparing to send children to college and some are embarking on a long term goal of buying properties to build rental income. Whatever their personal priorities are, my job is to put together a mortgage with comfortable terms that will help them achieve their goals.”
Jo Garner is a mortgage officer with extensive knowledge in tailoring mortgages to her customers who are refinancing or purchasing homes all over the country. She offers conventional, FHA, VA or other loan programs for refinancing and purchases.
Jo can help you look at rent vs buy, when it makes sense to refinance, how to get the best deal on your home purchase financing.
Jo Garner has been in the real estate/financing business since 1987. She got her start in Portland, Maine where she first began her real estate career. She received her real estate education from the University of Southern Maine and was personally mentored in San Diego, California by Robert G. Allen, author of Nothing Down, Creating Wealth and The Challenge.
On moving back to West Tennessee in 1987, she went into business buying and selling discounted owner-financed notes secured on real estate. In 1990 Jo went to work for a residential mortgage company and has been a mortgage loan officer for over 20 years. Her goal is to offer excellent, affordable service to her customers, tailoring the loan programs to the specific needs of her clients.
In addition to her work in the mortgage field, Jo Garner is the primary sponsor and founder of Talk Shoppe in Memphis. www.TalkShoppe.com She was also the editor of Power Shoppe, a free weekly e-zine designed for real estate professionals and others indirectly connected to the real estate industry and currently publishes on her blog www.JoGarner.com .
For real estate financing solutions, plug into Real Estate Mortgage Shoppe. You can find mortgage rates, FHA Streamline refinance with no out-of-pocket costs, and more.