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Short Sale Sign
As a property appraiser, Abbe Edelman has experience with a wide variety of property appraisals. One of the most misunderstood appraisals has to do with short sales. A short sale is basically an alternative to having the home go into foreclosure. This is typically seen when the value of the property dropped enough that the current market value dipped below what the homeowner owes on the home. The homeowner may become the seller, but they will have to work closely with the lender to seal a deal and a property appraisal will most likely be required.
Analyzing Information
The property appraiser usually uses comparable homes in the same area to help determine a home’s value. They will need to consider transactions that have occurred in the region on similar homes and determine which are most relevant to the home they are assessing. This means that they will be looking at other property sales that most closely resemble the property. This will include its location, condition size and other features that may be shared or unique. Generally, a particular feature that might be worth a certain amount of money may not be worth as much in a distressed market.
Purpose of a Short Sale Appraisal
A traditional property appraisal is conducted prior to the sale of a home. It is a step in the purchasing process which protects both the borrower and the lender. The property appraiser comes out and evaluates the property and assigns a value to it so that the lender knows how much they can recoup should the borrower default on the loan. Knowing the real value of the property also protects the buyer from borrowing more than the home is worth. This value is based on the home’s fair market value at the time of the sale. Before a seller will list a property up for short sale the lender usually asks for the seller to prove that the property’s value is less than what is owed on the balance. Before approving any sells or any loans, a lender will typically request that a property appraiser be hired in order to determine the fair market value of the property.
Is it a Bargain?
Most people who are looking for a short sale will think that they are always a bargain, but this is not always so. There is still no guarantee that the home is worth the sale price that they are paying for it. A home may be sold for an amount that is lower than what the previous owner owed on the loan. This does not mean that they are getting the home at an amount that is less than the current fair market value, just that they are getting it for less than what was owed on the loan. For cash buyers there are no requirements that a property appraiser be hired. It is still a good idea so that they can get a comparative market analysis for the home. There are various state and federal laws that regulate various real estate practices. But the practices of lenders can vary among them. Some lenders may require a property appraisal and others may not they may choose instead to go with the appraisal that was completed before the home was sold previously.
Example of a Short Sale
A homeowner may get in a bind on their mortgage after property values have been in decline for an extended period of time. They may choose to offer it for a short sale but must negotiate with the lending facility to do so. As an example, let’s say the property in question is worth $150,000 according to the property appraisal; but the borrower owes $180,000 on the note. The lender may agree to write off the remaining $30,000 as a loss and recoup the amount of $150,000 by offering it for short sale.
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