Real Estate Tips

After the buyer and seller come to a “meeting of the minds” on the price of a house, there is one more person who must be convinced that the house is worth the selling price–the mortgage company’s appraiser.

The appraiser looks for three similar houses that have sold in the same area within the last several months, and compares the selling prices of these homes with the one that is now on the market. The appraiser makes adjustments to account for the differences in each property, and averages the adjusted prices of the other three homes to arrive at a final opinion of value. In subdivisions or condominium projects where there are many similar properties and numerous recent sales, the appraiser’s job is relatively easy. In neighborhoods of older homes that have been renovated or remodeled over the years, it can be like comparing apples and oranges helpful site.

If the appraiser’s evaluation is lower than the selling price, it can stall the transaction because the lender may decline the buyer’s loan because of the discrepancy. A real estate agent can work to minimize potential delays associated with the appraisal process by helping the seller to price the home as close to fair market value as possible.

It is not unusual for homeowners to yield to the temptation to try to sell their own home. It seems easy enough–just place an ad in the weekend paper and wait for buyers to show up. Although it may seem simple, real estate sales transactions are extremely complex proceedings.

The first pitfall can come with pricing your property realistically. Homeowners often price their property too high initially, then drastically slash the price when weeks go buy without an offer. Even if a prospective buyer agrees to the initial asking price, there could be complications if the buyers begin to feel that they have agreed to pay too much, or if the lender’s appraisal values the property at far less than the agreed-upon price. Some of our clients hired us to market their home professionally after weeks or months of trying to sell their own home without success, or after their FSBO transaction fell through.

When you buy a house or refinance your present home, your lender will ask you to pay for an appraisal to help ensure that the sales price and mortgage amount is consistent with the property’s market value. The appraiser will look for “three caballeros” or three “comparables” — homes that are very similar to the one you are buying — and will make adjustments to reflect the differences between the properties.

Housing patterns tend to be homogenous, meaning that homes worth $300,000 are usually located in $300,000 neighborhoods. It is important for properties to be within the general pricing patterns of their neighborhoods because over-valued homes, even if they are exceptional, are sometimes difficult to sell at full market price.

This is not the only factor considered in determining the worth of a property, but it is an important one. The buyer or seller may view the property as a home or an investment, but lenders view it in a completely different way. To a lender, property means security in the event a borrower fails to repay a mortgage. Therefore, lenders must know real estate values in order to limit their risks.

Many sellers think that the price of their home is determined solely by what they are willing to accept and what the buyer is willing to pay. However, there is one more variable that can affect the sale of a home assuming that a bank loan is involved — the lender’s appraisal.

To protect the interest of their investors, the buyer’s mortgage lender hires a licensed appraiser to give an independent, objective opinion of what the property is worth. The appraiser compares the house with similar homes in the neighborhood that have recently sold. Square footage, amenities and the condition of the home are taken into account. Renovations and home improvements made by the seller usually add value to the home, while defects such as needed repairs or code violations decrease the property’s value. The seller’s real estate agent can provide the appraiser with up-to-date information about neighboring homes that have sold to support the seller’s asking price.

Interest rates fluctuate as changes occur in the general economy. If you purchased your home when interest rates were higher, you may want to consider re-financing your loan at a lower rate.

You will have to apply for the new mortgage and have your current income eligibility assessed. Depending on how long you have had your present loan, a current appraisal may be required. There are closing costs, such as attorney, title fees, recording and notary fees, and appraisal charges. The biggest factor in your decision should be the length of time you plan to remain in your home. If you will be there for only a year or two more, it might not pay to re-finance. If you will be in your home longer, re-financing could provide you with lower mortgage payments. Your real estate agent can help you work out the numbers and can refer you to reputable home appraisers and mortgage lenders.

Technical terms can be confusing to people who do not work in a profession, and real estate agents use language that may be confusing to many home buyers and sellers.

If you find your eyes glazing over when your real estate agent starts talking about escrow, clear title, easements, encroachments, contingencies, financing, appraisals and the closing process, don’t hesitate to ask for a translation. Buying or selling a home is a major step, and professional real estate agents are totally committed to helping you understand the process thoroughly so that you can make informed decisions.

The simple transaction of trading the sellers’ house for the buyers’ money has become complicated by several hundred years of custom, common law, and state and local government requirements. Consumer demands have resulted in up-to-date rules that communication be as clear and understandable as possible. Real estate agents work to create an atmosphere in which you feel comfortable to ask questions.

Every city and county has zoning laws that define and restrict how property owners can use the land. The purpose of zoning regulations is to establish development standards and to ensure that the land is used for the common good.

There are restrictions on both the type of structures you can build and how the property can be used. Common zoning categories are residential, agricultural, industrial, commercial and recreational. There are sub-categories such as single-family residential zones and multiple family residential zones, (areas where condo and apartment complexes are permitted.)

Zoning ordinances also contain restrictions on the height and square footage of the buildings, the number of stories allowed and how close buildings can be to one another. They state what kinds of facilities are required for each form of use — for instance, a residential property must have a driveway. Whether you intend to buy a new piece of property or improve one that you already own, zoning laws will dictate what you will be able to do with your land.

Zoning classifications are the most important tool that a local government has to control the way land is used in a community. Areas designated as residential may have further controls on housing density for single family homes, townhouses or multiple-family houses. There are usually areas set aside for industrial, commercial and recreational purposes. Zoning boards spend their time listening to requests for exceptions to these rules or hearing arguments from parties who want to change or bend the existing zoning regulations.

These zoning decisions have a major impact on the surrounding neighborhoods. Citizens’ groups often get involved in testifying at hearings on proposals that could affect their property values or their quality of life. These groups help create interest about issues in the local press and work to educate their neighbors about matters affecting them. Developers who go before a zoning board seeking major changes are wise to involve the local neighborhood group in formulating proposals that will affect those homeowners.

When you are selecting land on which to build your new home, be certain to investigate the zoning for that particular area. You might fall in love with rural acreage that just happens to be zoned for agricultural or recreational purposes. Since zoning uses are not interchangeable, you would need to apply for a variance in order to build a single-family residential dwelling on the land. This can be a challenging process!

Getting approval to have the zoning changed on property requires that you first give public notice, and then request approval for a variance from the government agencies that supervise enforcement of the zoning plan. You might encounter resistance from neighbors or various local interest groups who oppose the zoning changes that would allow you to build your dream home.

Your local planning department can tell you how a particular property is zoned and explain what you need to do to get a variance. Your real estate agent may be able to refer you to a local land use attorney who can guide you through the process.

Before your mortgage application is approved, the lender will order a professional appraisal of the home to make sure that the agreed-upon selling price is justifiable based on the current market value of the property. The cost of the appraisal will be based on the complexity of the appraisal report and the time required to complete it.

A professional appraiser will choose the appraisal technique that is applicable to the particular property to arrive at an unbiased opinion of value. One approach is to look at comparable homes in the area that have sold within the last six months. If there are a number of similar properties that have sold recently, the appraiser’s job is easy. It is more complicated to arrive at the appraised value if your home is located in a rural area or a diverse neighborhood.

The appraised value will usually be very close to the sale price. If the appraisal comes in lower, the real estate agent may be able to provide the appraisers with additional information on recent sales which will result in increased value.