Buying a Home – One Tip That Will Make a Huge Difference

If you’re like most people buying a home or a condo right now, you got a real estate agent and started looking.  The mortgage brokers, the real estate attorney, they came later.  The home inspector, too.  The appraiser never.

I’m going to suggest that skipping on talking with an appraiser is a big mistake.

Yes, I’m going to suggest you have the house or condo you select appraised even though the bank is going to have it appraised, even though the bank is not going to use your appraisal.

If you’re going to object to getting an appraisal on account that an appraisal costs some three hundred dollars, I’ll remind you that you’re about to spend tens of thousands of dollars, at least, and most likely a couple hundred thousand.

Let me make that extra clear.  A 15% mistake on a $200,000 house is $30,000, which is 70 to 100 times more than an appraisal.

So, why do I think you should use an appraiser?

Because appraisers know a lot of things you do not about real estate and property values and neighborhood trends.

Because when you hire they have a fiduciary relationship with you not with the bank; they answer your questions, not questions that help a bank.  And that’s important because what is good for the bank is not necessarily good for you.  Appraisals made for banks answer the questions banks have.  Yes, there’s overlap.  But it’s not 100%.  

Appraising real estate is part art.  So, you need a good appraiser.  And you need to know that appraisers do more than just estimate the value of a home.

They can tell you if there are problems with the location or the house that would make refinancing it or reselling it difficult.

Just because you like the property you’re buying and, later, find someone who likes it too and wants to buy it doesn’t mean you can sell it if the person you found to buy it from you needs a mortgage.

You see, banks are fond of lending on the most common types of properties, determined neighborhood by neighborhood.  Don’t buy a 2-bedroom, frame ranch with no basement in a neighborhood where there are only 3 2-bedroom, frame ranches without a basement.  Buy one in a neighborhood where they have dozens of them.  That kind of thing.

Appraisers can also alert you to possible zoning issues or to zoning changes in the works and tell you what impact they’ll have on your property.  
On one hand, it doesn’t sound like much, real estate agents can do that too.  But appraisers base their conclusions on far more thorough research than agents do.  And appraisers have a better understanding of how bank underwriters view your properties and its neighborhood.

The key issue here is the quality of the appraiser.  Just as a mediocre real estate can locate a house you like but fail to help you negotiate a good price or to find out about condo association management issues and such things, a mediocre appraiser can come up with the right value range for the property you propose to buy yet fail to provide you with a true picture of its neighborhood or of conformity issues.

When I say things like these to people, they counter that between their agent and themselves, they’ve to all of those things covered.

But they don’t.  They miss an essential point.  Both they and their agent can get emotionally involved.  And emotions cloud judgment.  The better, more successful the real estate agent, the lesser the chances of him/her needing the sale to happen.  Still, the possibility of emotions clouding their judgment is always there.

A good real estate who’s paid his/her fee whether there’s a sale or not has, obviously, no reason to want to make it happen.  So, no emotions clouding judgment.

So, talk to a real estate appraiser every time you’re buying a home.  If you really care about yourself, you’ll hire one before you’ve made an offer; to help you sort through neighborhoods; to point out to you how banks look are going to look at the properties you’re considering making an offer on.

Overpaying by $35,000 on a $242,000 condo isn’t fun.  Thinking you’ve got a house for $55,000 below value when, in fact, you’ve paid full price – no fun either.  And it’s no fun to find out that the $147,000 condo you bought three months ago is now worth $75,000 because of mold issues you should, and could, have known about.

The bank appraiser should have caught the mold issue.  However, banks don’t select (vet) an appraiser.  They hire an appraisal management company.  Whose idea of a good appraiser includes ‘fast’ and ‘cheap’ but doesn’t include ‘thorough’ or ‘familiar with the neighborhood.’

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About the author

According to Dan M. Kennedy, most people don’t know what to look for when they’re buying real estate, especially condos. The more information you have about the house you’re considering buying, the better off you’ll be. That’s true if you’re looking at condos for sale in Chicago too. Both because there are always many Chicago condos for sale and because Chicago has neighborhoods where the quality of the condos change from building to building.

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