What to Do After a Low Real Estate Appraisal

 

This week, we received another question from a viewer: “the appraiser didn’t value our property at the purchase price. What do we do?” In other words, what happens if bank hires an appraiser who determines that the house you are buying is worth less than the agreed upon purchase price?

The first step is always to look at the Purchase and Sale Agreement. Your P&S may identify this as a potential issue and it may offer a solution. If the P&S contains a financing contingency clause it may state that if the appraiser determines the value is less than the purchase price, then the Buyer may terminate the P&S. This provides the Buyer with leverage to negotiate with the seller. Since the Buyer has to terminate, the seller will very often agree to lower the price to allow the transaction to continue.

What happens if the Seller will not negotiate and the Buyer still wants to buy? The Buyer’s next step should be to talk to lender. A low appraisal will result in a change to the loan to value ratio (“LTV”). Without adjusting the loan amount, the ratio between the loan amount and appraised value will be lower. A common solution in this case is for the Buyer to make a larger down payment.

Sellers should remember that the next potential Buyer should receive the same appraisal. Engaging in good faith negotiation is always a good idea.

If you would like more information about low appraisals contact Stiles Law at (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

Assessment vs Appraisal: What’s the Difference?

 

We received another question: “What is the right number, an appraised value or an assessed value?”

First, what’s the difference? An appraised value is a number that is determined by a licensed appraiser. Appraisers must take continuing education classes, they must go through licensing, and often use multiple factors to determine what a fair market value for the property may be. For instances, comparable properties that have recently sold, quality of finishes, or other improvements can impact the appraised value.

Assessed value is determined by the town through the assessor’s office. An appraised value is almost always closer to fair market value. Assessed value is less accurate and is used only to determine your tax obligations.

Appraisals cost money, so what should you do if you want to sell? We always recommend against relying on an assessment. Usually, spending money on an appraisal not necessary because a quality agent can generate an estimated value by doing a comparative market analysis. The agent will come up with a range of what the house may be worth.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

Can I Deed My Home into my Trust?

We receive this question often: “I just purchased a property, and would like to move it into my trust. Can I do that?” A homeowner should consider a few things before doing so.

You may violate a covenant in your mortgage. Your lender has not had an opportunity to qualify your trust. If you receive permission from your lender first, you avoid the risk of the lender claiming you are in default and initiating foreclosure proceedings. There are exceptions under federal law for estate planning. You should always consult a real estate attorney, CPA, and often times a financial advisor before deciding to place your home into trust.

There is one more critical consideration: if you have a title insurance policy, you should check with your real estate attorney who will contact your title insurer to determine whether you need a “change endorsement.” If such an endorsement is required, transferring without it could mean your policy no longer protects your interest in your property.

You can transfer your property into trust, but check with your lender and consult a real estate attorney first. If you would like more information about transferring your property into trust, contact Stiles Law at (781) 319-1900.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.

South Shore Real Estate Blog: The Great Thaw—Five Ways to Loosen Inventory

Bob ThawAnyone involved with today’s market undoubtedly knows that we are in a period of low inventory. This week, we’re going to look at five strategies that allow Buyers and Agents to help thaw an otherwise frozen market.

  1. One Day Exclusive Listing Agreements:

Ordinarily, a Buyer’s Agent will search the MLS looking for homes that meet their Buyer’s requirements within a given area. Due to low inventory, very often there are few homes, if any, to show a Buyer. In this situation, an Agent should consider what’s known as a “one day exclusive listing agreement.” Very simply, the Agent will send a letter stating that they are an Agent of a Buyer who is interested in their home. The Agent will represent/list the recipient’s home for a single day to allow their Buyer to view and potentially submit an offer and as an additional benefit to the Agent, even if the Buyer does not make an offer, for whatever reason, the Seller will often ask the Agent to list their home for sale because now their mindset has shifted due to the excitement of moving. Result: the Buyer is able to see more houses, the Seller is spurred to list their house, and the Agent either sells a house or gets a listing: this is  truly a win, win, win situation.

2. Technology/Social Media: 

One may take the “old school” approach of actually knocking on doors and asking if the owner is interested in selling; and it may work. With social media as a platform to broadcast a desire or need, it’s easy for an Agent to post what their client is looking for, perhaps enticing an otherwise non-selling homeowner to sell their home. For example: “I have a Buyer looking for a 3 bedroom home with a yard big enough for their dog in Mytown, USA.” As an additional benefit, you are marketing and developing your brand as a Real Estate Agent. Friends who didn’t know you were an Agent will be reminded by such posts. Use technology and creativity to “manufacture” inventory and develop your brand.

3. Negotiate a Home Sale Contingency:

Many Buyers are sitting on the sidelines waiting for inventory to increase. The problem is that many of these Buyers are also would-be Sellers. To increase inventory, Buyers who also need to sell should make an offer which includes a home sale contingency with their offer. That said, not all home sale contingencies are created equal. There are generally four types which expire at different points of the sale process: 1) the Seller becoming party to a signed offer, 2) the Seller becoming a party to a signed purchase and sale agreement, 3) the Seller’s Buyer receiving their mortgage commitment, or 4) the Seller closing on their sale and receiving proceeds. An Agent guiding their Buyer should define precisely which type of home sale contingency they are seeking. Sellers should bear in mind that while inventory is low, there’s a good chance that the Buyer will sell their own home quickly assuming their home is properly marketed at a realistic price. The Seller’s agent may be able to evaluate the Buyer’s marketing strategy and home to get a better sense of how likely it will be to sell at the Buyer’s listing price.

Notwithstanding, Sellers may also choose to include a “Kickout Clause” in their counter offer. Generally speaking, a kickout clause allows the Seller to continue listing their house for sale, during which time if the Seller receives a bona fide offer that is stronger than the Buyer’s offer, the Buyer is given a defined period to either waive the home sale contingency or exercise their rights under the contingency to terminate the Agreement. For more information on kickout clauses, read our article, The Offer Part 2 – Contingencies for Sellers to Consider.

4. Negotiate a Suitable Housing Contingency:

Many Sellers are saying that “If I found the right house, I would sell mine.” Those Sellers are sitting on the sidelines waiting for inventory to increase so that they can find their next house. (Some homeowners simply prefer to Sell before they buy. Buying before selling comes with the risk of not being able to find a home to purchase before having to close on their sale.) As with sale contingencies, not all suitable housing contingencies are created equal. A suitable housing contingency generally expires at one of four points: when the Seller 1) signs an offer, 2) signs a purchase and sale agreement, 3) receives a mortgage commitment, or 4) closes on their purchase. The benefit of sharing the risk is that Buyers who would otherwise wait for inventory to increase before listing will be willing to list and sell their homes, thus, increasing inventory.

5. Disclose the Seller’s Time Requirements:

Finally, a Seller may choose to disclose on the listing that they need more time than is customary between signing the Purchase and Sale Agreement and closing: sixty days or even longer is not unreasonable when properly disclosed. Many Buyers are flexible and wouldn’t mind extra time if it means buying the home of their dreams.

While the above strategies do not present a complete panacea, using one day exclusive listings and strategic contingencies can help to bring homes that would otherwise stay off the market, into the market. The common thread between these five strategies is creativity. Creative thinking can help to thaw the frozen market, benefiting Buyer, Sellers and even Agents, alike.

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Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2016 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.

 

The Massachusetts South Shore Real Estate Blog: The Active Client (Part 2 of 2): How to Work Effectively with your Listing Agent

SoldLast time, in part one of our two part series: The Active Client: How to Work Effectively with your Buyer’s Agent, we discussed some important considerations for Buyers working with an Agent. Many of those considerations are also applicable in the context of Selling a home; however, there are some strategies that are unique to selling a home. As we’ve discussed previously in our article: Ten Reasons to Use a Real Estate Agent When Selling Your Home, every Seller should use an Agent to sell their home. The knowledgeable Seller will know that there are approaches to the client-Agent relationship that will help to sell your home quickly, for top dollar.

Pick the Right Agent: Alright, we admit that this is not technically a strategy to work with an Agent, but it makes the rest of the strategies much more effective. First, it’s important to find an Agent that is experienced and professional. Research your prospective Agent’s resume. Review their current listings. Are you impressed with the way that your Agent presents him/herself and his/her listings? Second, meet the Agent in person. Make sure that your personalities will work well together. Third, don’t rely solely on the price an Agent suggests as the basis for selecting that Agent. Suppose you discuss the listing with three potential agents. Two agents suggest a price of $400,000. The third suggests $500,000. It’s incredibly tempting to agree to list with the Agent that gives you the highest price. Take a moment to consider the possibility that the Agent may have given you an inflated price to secure your business with the knowledge that the price will inevitably be reduced to a realistic point. On the flip side, be cautious of a low target price as the Agent may be intentionally or unintentionally trying to make his/her sale easier, to your detriment. Finally, ask how they intend to market the property and how many other listings they currently have. If your Agent has twenty other listings, it’s unlikely (s)he will give yours as much attention as an Agent with fewer. Further, if your Agent’s strategy is to list it on MLS and do nothing else—you may want to consider an Agent that will more actively market your property.

No Secrets: It’s time to take the skeletons out of the closet (figuratively, of course—we hope). If you’re a seller, provide complete information about your home so that it can be presented fairly to potential Buyers. Honesty with Buyers often reassures them that you aren’t trying to take advantage of their relative lack of information about the property. More often than not, the major fault will be found during the home inspection, usually resulting in a request for a concession. If your Agent knows about the problem (s)he can preempt and present the issue in the most positive light and take the “sting out” while making the Buyer understand that the issue was factored into the pricing.

Don’t be Afraid to Ask for Advice: Last week, we discussed that Agents are experts in buying homes. The same is true when it comes to listing and negotiation. In addition to helping Seller’s set realistic pricing, experienced Agents will be able to provide insight into what Buyers prefer and what will help to set a listing apart from the crowd. In a market where inventory is set to increase dramatically, this is an invaluable service. Perhaps (s)he’ll suggest making modest upgrades, staging a room, setting a different price, or putting some of your property into storage. Try not to take advice personally—your agent understands that the goal is to appeal to as many potential Buyers as possible.

Explain why an Offer isn’t Adequate: maybe the closing date is not right for you, maybe the offer price is too low, maybe the offer is contingent on the buyer selling their current residence.  Giving feedback to your agent serves two purposes: 1) perhaps there is potential to make a counteroffer or 2) it will help the Agent guide future Buyers toward terms that are more likely to be acceptable to you.

Stay Positive: Your Agent will almost always go the extra mile when they have a personal connection and affinity for a client. Don’t treat your agent like a servant; she/he  is a professional. Perhaps it’s the extra phone call to another agent who has a Buyer in your area. Perhaps it’s spending additional time to make sure the house is perfectly prepped before an open house. If your agent likes you, chances are you’ll like your agent too.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2015 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.

 

 

The Massachusetts South Shore Real Estate Blog: The Active Client (Part 1 of 2): How to Work Effectively with your Buyer’s Agent

Communication is KeyEven as some of us are groaning at the sight of stubborn snowflakes, we are starting to see the spring market hit its stride. The relationship between an Agent and their client is immensely important. While the Agent, as an expert, should take the lead, the savvy client will take steps to maximize this relationship to realize their goals. This week, we are exploring what it takes to effectively work with your real estate Agent in the first of a two part series: The Active Client.  In this article, we will focus on what it takes to be an effective Buyer:

  • Communication: Yes, communication is essential in real estate, not unlike business, family, and most other matters.  However, in today’s environment of always on, instant gratification expectations, it’s more important than ever to respond to your Agent’s questions quickly.  The listing for your dream home, at the “I-can’t-believe-it” price, may only be available for a couple of days if not hours—quick response to your Agent’s suggestion may make all of the difference. Your offer may be one of multiple offers pending and the quicker you solidify your best offer, the better your chance of it being accepted by the seller.  If you delay in responding to your Agent in either of these situations, it may really be a day late… and a dollar short.
  • Honesty with Yourself and Your Agent: Every elementary school student knows that honesty is the best policy: but sometimes after some intervening years, we forget this simple maxim. Be clear with your Agent about your price range, pre-approval status, and geography. If your Agent is prospecting houses for you in the wrong town or the wrong price range, it usually just means that you won’t find the house of your dreams.  Don’t be nasty, but this isn’t the time to be too polite either; be purposeful. Nothing sours a relationship like wasted time and effort. Tell your Agent what you like and what you don’t like—your next showing will likely be better than the last. While it might be smart to see houses that are outside of what you’re expecting to purchase, a moving target is much harder for your Agent to hit. This isn’t to say that you have to know precisely what you want– if information changes mid-stream, just update your Agent.
  • Rely on your Agent’s Expertise: You hired a Buyer’s Agent because their primary asset is their expertise in the field of buying a house. You may lack this expertise, so rely on theirs. Regular readers will recall this point in our article: Ten Reasons to Use a Buyer’s Agent when Buying a Home. Perhaps your Agent feels that your low ball offer may offend the Seller causing them not to want to deal with you. Your Agent has presented many offers in the past, so (s)he has a good feel for how that offer will be received by the Seller. Maybe your Agent is trying to provide a dose of reality when there is a negative aspect to a listing. Perhaps your Agent wants you to look at a type of home that you haven’t considered because it fits your lifestyle or goals. More often than not, their expertise can help you find the perfect home.
  • Teamwork is Key: Keep in mind that when you are buying a house, you are relying on your Agent’s team of professionals. Teamwork is essential to a successful transaction.  Delegating tasks to team members means that your capabilities are greater than if you were acting on your own.  Members of your team, in addition to your Agent include home inspectors, lenders, real estate attorneys, or even neighbors!  Professionals that know how to work with each other will accomplish goals quickly and more often. Think about it this way: when your Agent refers you to a professional, your Agent is implicitly confident that their referral will maximize the chances of the deal closing with as little risk and inconvenience to you as possible. Your Agent won’t (or at least shouldn’t) be referring you to professionals with whom they don’t have a strong track record of success. If you feel that a member of your Agent’s team is not working out the way you’d hoped, you can recruit your new team members. Just remember, you usually shouldn’t be tackling the difficult task of buying a house by yourself.

Each of the points above should help you to set yourself up for a smooth – and successful – foray into the real estate market.  Being an active client, working with your Agent effectively will increase your agility, speed, and success rate. So go out there and work with your Agent.  Trust your Agent.  If nothing else, return your Agent’s phone calls quickly!

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2015 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.