The Ultimate Tips to Overcome Objections

The Ultimate Tips to Overcome Objections
business agreement

The Ultimate Tips to Overcome Objections

Are you putting a ton of work into your sales process—working with a prospect for days, weeks, maybe even months—to get a deal to the finish line? Just to see it fall through because of some last-minute objection?

Today, we are going to talk about how to make you a stronger salesperson by working on overcoming objections.

Number One

The first thing we want to talk about today: Don’t get scared. It sounds so simple, but every sale has objections. If objections weren’t part of the sales process, everyone would be in sales. This is your chance to show how good of a sales rep you are. Know that the objection is going to come, and be prepared.

Number Two

That’s our second tip: be prepared. You know that there’s three to five objections in any sale that you’re automatically going to get. Don’t worry about the random ones that creep up; those are not going to be the majority of the things you have to deal with. It’s things like the partner, I have to check my budget, let me think about it—things you’re going to get on a daily basis. Make sure you have your script, practice it, and be prepared to deliver your rebuttal to that objection.

Number Three

The third tip: be confident. This is the point in the buying process where your buyer is starting to get a little fearful. They aren’t sure if they want to move forward and they’re a little less confident. You need to be confident for them. They need reassurance at this point. Do not waiver. Be confident. Stand your ground.

Number Four

Lastly, with our fourth tip: ask for the order. So many reps freeze in this moment. They give their prospect more time to think about why they should not move forward. If you can transition from your rebuttal into asking for the order again, you’re going to show your prospects how confident you are that they’re making a smart decision with choosing to work with you today.

There you have it. Four quick tips that hopefully help you deal better with the objections in your day to day. If you like what you saw here, start following us on Facebook and Instagram. But most of all, take action!

Making an Offer on a House? 11 Strategies to Win

Making an Offer on a House? 11 Strategies to Win
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Making an Offer on a House? 11 Strategies to Win

So you’ve found your dream house and you’re ready to make an offer, but how do you make sure your offer stands out among all the others? How do you make your offer more appealing? Whether you’re dealing with a competitive housing market or a cautious seller, getting your offer accepted requires creativity, compromise, and a strong strategy.

So how can you convince a seller to side in your favor? Check out these 11 strategies to help you seal the deal and make “home sweet home” a reality.

1. Get pre-approved for a home loan
Getting pre-approved will show the home seller you can actually afford to buy the home. This is an important step for a buyer in any situation, but it’s even more critical if you want to make the strongest case that your offer is solid.

2. Offer more than the list price
Whether you’re making an offer on a house in Atlanta, GA or are looking to buy a condo in Dallas, TX, offering more money than anyone else usually wins the deal. So if you can afford it, offer more than the list price.

3. Add an escalation addendum
When making an offer on a house, you can stipulate that if anyone beats your offer you’ll raise your offer by a certain amount, with a cap as high as you’re willing to go. This also helps you avoid overpaying, but still keeps you in the game in case there are other offers coming in.

4. Waive contingencies
Contingencies are certain things that must be met in order to close a deal on a property – such as a home inspection. In multiple offer situations, buyers can waive some or all contingencies to reduce the seller’s risk and speed up the home selling process. Generally, the fewer contingencies you have, the stronger, but riskier, your offer.

5. Increase earnest money
Earnest money, also referred to as the good faith deposit, is typically 1%–3% of the sale price of the home and is applied toward the buyer’s closing costs. It also shows that a homebuyer is serious about the purchase of a home, because if they walk away from a deal after it’s been accepted, such as a change of heart, the home seller usually gets to keep the earnest money. By increasing the amount of earnest money you put down, you can show how serious you are about buying any home.

6 . Increase the amount you’re willing to put down
A higher down payment typically means less financing issues with a mortgage lender and also less risk for a seller. So when you are wondering how to make an offer on a home and win, a higher down payment can make the difference. Presenting documents such as pay stubs, tax forms, and your 401(k) balance can also show that not only are you prepared to put more down, but you also have the funds to do it.

7. Write a personal letter to the seller
Sometimes a personal offer letter can win a seller over when making an offer on a house. Tell them what you love about the home and try to make a personal connection. Compliment them on a recent renovation, a color palette choice, or the landscaping. It won’t always matter, but sometimes a personal touch such as a letter can mean more than having the highest bid.

8. Release earnest money early
This means the seller gets your earnest money, in cash, prior to closing. The strongest offers release all of it immediately upon going under contract. Note: This option only makes sense if you waive all contingencies when making an offer on a house.

9. Be flexible with the closing date
If your lender allows and you’ve been through underwriting, you can promise to close quicker (15–21 days). Generally, the faster the closing process, the stronger your offer. However, the seller may be looking for a longer closing process. In that case, letting the home seller know that you’re flexible with the closing date could allow them the much needed time to move their belongings into their next house.

10. Arrange a rent-back agreement
If the seller is nervous about selling their home before they can buy a new one, you can offer to be flexible with the closing date or arrange a rent-back agreement.This gives the sellers extra time to live in the home after closing. Essentially the buyer takes on the role of the landlord, and the seller becomes the tenant for a short period of time.

11. Pay in cash
This isn’t going to apply to everyone, but if you have the cash to cover the purchase price, offer to pay it all up front instead of getting financing. Not only are you eliminating the need for a third party to get involved in the deal, but you’re also showing the seller that you mean business.

Originally published by Redfin

Protect Your Clients from the Latest Loan Modification Scams!

Protect Your Clients from the Latest Loan Modification Scams!
Man in front of computer

Protect Your Clients from the Latest Loan Modification Scams!

You are the trusted real estate advisor so it’s likely that past clients will contact you when they are struggling with their mortgage payment or have received information in the mail on loan modification or avoiding foreclosure.

Here’s some information on the latest scams out there:

Phony Counselors: Scam artists present themselves as “counselors” who will negotiate a deal with the lender IF the borrower pays a fee first. Some scammers even require that all the mortgage payments be made to them while they negotiate on the borrower’s behalf.

Fake “Government” Modifications: Scammers will claim to be approved or affiliated with the government. Their documents and website will use terms like “federal” and “TARP”. They will claim a fee is necessary to use the modification program. Borrowers should call their lenders directly to find out if they qualify for a government loan modification.

Bait and Switch: The scam artist tells borrowers that by signing loan modification documents the existing mortgage will become current. What the borrower is really signing surrenders title to the scammer in exchange for a “rescue loan”.

Rent-to-Own or Leaseback Schemes: Scammers tell borrowers that if they will surrender title to their home that they can stay there as a renter, and then buy the home back in a few years. The scammer then raises the rent over time to the point they can’t pay. The scammer evicts the borrower and sells the home. Another variation is when the scammer has the borrower sign over title and move out. They promise to find a buyer for the home and share part of the profit once the home is sold. What really happens is that the scammer rents out the home, never making the mortgage payments and lets the lender eventually foreclose, while they walk away with all the rent money.

Bankruptcy to Avoid Foreclosure: The scammer promises to negotiate a refinance with the lender for a fee. He pockets the fee and files a bankruptcy in the name of the borrower without the borrower’s knowledge to temporarily stop the foreclosure process. The borrower thinks things are going well because the collection calls stop.

Choosing the right Realtor and Lender

Choosing the right Realtor and Lender
choosing the right realtor and lender blog photo

Choosing the right Realtor and Lender

Why the Right Realtor Makes All the Difference When It Comes to Selling Your Home:

The Realtor’s role is critical in the home selling process. The right realtor is an experienced salesperson and a creative marketer who knows the local real estate market. They can successfully leverage all channels to advertise your home to the widest available audience.  They’ll help you determine a reasonable price, help you prepare your home for viewing and be the go between during critical negotiations with potentials buyers.  Choosing the right realtor means a better selling price and a faster closing.

The right Realtor will:

  • Prepare comparisons to help you determine the right selling price for your home
  • Assist you in showcasing your home to its best advantage
  • Market your home to reach the widest audience using all available channels.
  • Focus on qualified pre- approved buyers so you can move quickly when an offer comes in.
  • Host an Open House and network with other realtors to attract buyers.
  • Oversee inspections, and manage any other professionals needing access to your home.
  • Negotiate with potential buyers to arrive at an acceptable price.
  • Accompany you to the closing and making sure you’re well prepared.

Choose the Right Lender Before You Begin Looking for That New Home:

Trying to sell a home while looking to buy at the same time can be stressful. Avoid that stress by choosing your lender first. ILS will make sure you’re fully prepared to begin your house hunting your house hunting with a free fully underwritten pre-approval. Unlike a traditional pre-qualification, a pre-approval is a detailed picture of your credit worthiness, verified by a full review of your income and assets by an ILS Mortgage Underwriter. With a pre-approval letter from ILS you have the confidence you need to make an offer.  You’ll, know what you can afford, negotiate better and even close faster. All that’s left for final approval is an appraisal and title search and no material changes to your financial condition. Your ILS Loan Officer will assist throughout the home buying process and make sure you have everything you need when it comes time to close.

Your Ideal Lending Solutions Loan Officer will:

  • Have a pre-approval letter in hand before you start looking for a home
  • Walk you through the mortgage loan process
  • Help you choose a loan program that meets your unique needs
  • Lock in your interest rate and disclose all fees and costs

* A pre-approval does not constitute a loan commitment or guarantee of a loan.  Pre-approval is subject to a satisfactory appraisal, satisfactory title search, and no meaningful change to borrower’s financial condition.

Ideal Lending Solutions has locations across the great state of Florida to assist you.
Mortgage Lender in West Palm Beach | Mortgage Lender in Boca Raton | Mortgage Lender in Jupiter | Mortgage Lender in Miami | Mortgage Lender in Cocoa Beach

Safety Tips for Real Estate Agents

Safety Tips for Real Estate Agents
Real Estate Agent

Safety Tips for Real Estate Agents

According to the National Association of Realtors (NAR) Member Safety Survey, almost half of female Realtors and one in four male Realtors have experienced a situation in the past year that made them fear for their personal safety or safety of their personal information.

Every job has its hazards. As a real estate agent, you are in a precarious position because you may be meeting clients you know nothing about. You may be alone while showing houses. You may have to hold an open house in a remote area of the city. Other than taking a self-defense course or keeping pepper spray in your briefcase, here are a few other tips to help you stay safe.

  • Never show a vacant home alone
  • Don’t sit in an open house alone
  • Meet new clients at your office and get a copy of their ID, take a picture of their car and get their license plate number
  • Make sure your cell phone has service in the area the home is located
  • Don’t wear expensive jewelry, watches or clothing that might attract attention
  • Have the police department on speed dial
  • Let someone know the list of homes you plan to show, and the time you will be back
  • Ask a coworker to call you at a specific time to make sure you are okay
  • If working alone in your office, draw the shades and deadbolt the locks
  • Never put your home address, home phone number or personal email on your business card
  • If you post your open house notices on social media sites, state that there will be assistants who will also be helping you host the event.

If you feel uncomfortable or you sense there is something wrong, get out of there immediately. Tell a lie if you have to. Always go with your “gut.”

We would be happy to help with your open houses. Contact us today!

Texting Shortcuts for Real Estate Agents

Texting Shortcuts for Real Estate Agents
Phone in hand photo

Texting Shortcuts for Real Estate Agents

There are a lot of texting shortcuts when texting or posting on social media, but did you know that there are specific interpretations for real estate agents?

Here are just a few of them:

  • LLL – Location, Location, Location
  • NTBS – Needs to be staged
  • LMAO – Let’s make an offer
  • WTF – What a terrible floor plan
  • WTD – Where’s the disclosure?
  • BTF – Buying the furniture
  • CC – Credit challenged
  • NPA – Not pre-approved

Done4You Realtor®

What to Expect During a Home Inspection

What to Expect During a Home Inspection

What to Expect During a Home Inspection

The first thing you need to know about home inspection: You’ll feel all the feels. There’s the excitement — the inspection could be the longest time you’re in the house, after the showing. Right behind that comes … anxiety. What if the inspector finds something wrong? So wrong you can’t buy the house? Then there’s impatience. Seriously, is this whole home-buying process over yet? Not yet. But you’re close. So take a deep breath. Because the most important thing to know about home inspection: It’s just too good for you, as a buyer, to skip. Here’s why.

A Home Inspector Is Your Protector

An inspector helps you make sure a house isn’t hiding anything before you commit for the long haul. (Think about it this way: You wouldn’t even get coffee with a stranger without checking out their history.)

A home inspector identifies any reasonably discoverable problems with the house (a leaky roof, faulty plumbing, etc.). Hiring an inspector is you doing your due diligence. To find a good one (more on how to do that soon), it helps to have an understanding of what the typical home inspection entails.

An inspection is all about lists.  

Before an inspection, the home inspector will review the seller’s property disclosure statement. (Each state has its own requirements for what sellers must disclose on these forms; some have stronger requirements than others.) The statement lists any flaws the seller is aware of that could negatively affect the home’s value.

The disclosure comes in the form of an outline, covering such things as:

  • Mold
  • Pest infestation
  • Roof leaks
  • Foundation damage
  • Other problems, depending on what your state mandates.

During the inspection, an inspector has three tasks: To:

  1. Identify problems with the house
  2. Suggest fixes
  3. Estimate how much repairs might cost

He or she produces a written report, usually including photos, that details any issues with the property. This report is critical to you and your agent — it’s what you’ll use to request repairs from the seller. (We’ll get into how you’ll do that in a minute, too.)

The Inspector Won’t Check Everything

Generally, inspectors only examine houses for problems that can be seen with the naked eye. They won’t be tearing down walls or using magical X-ray vision, to find hidden faults.

Inspectors also won’t put themselves in danger. If a roof is too high or steep, for example, they won’t climb up to check for missing or damaged shingles. They’ll use binoculars to examine it instead.

They can’t predict the future, either. While an inspector can give you a rough idea of how many more years that roof will hold up, he or she can’t tell you exactly when it will need to be replaced.

Finally, home inspectors are often generalists. A basic inspection doesn’t routinely include a thorough evaluation of:

  • Swimming pools
  • Wells
  • Septic systems
  • Structural engineering work
  • The ground beneath a home
  • Fireplaces and chimneys

When it comes to wood-burning fireplaces, for instance, most inspectors will open and close dampers to make sure they’re working, check chimneys for obstructions like birds’ nests, and note if they believe there’s reason to pursue a more thorough safety inspection.

If you’re concerned about the safety of a fireplace, you can hire a certified chimney inspector for about $125 to $325 per chimney; find one through the Chimney Safety Institute of America.

It’s Your Job to Check the Inspector

Now you’re ready to connect with someone who’s a pro at doing all of the above. Here’s where — once again — your real estate agent has your back. He or she can recommend reputable home inspectors to you.

In addition to getting recommendations (friends and relatives are handy for those, too), you can rely on online resources such as the American Society of Home Inspectors’ (ASHI) Find a Home Inspector tool, which lets you search by address, metro area, or neighborhood.

You’ll want to interview at least three inspectors before deciding whom to hire. During each chat, ask questions such as:

  • Are you licensed or certified? Inspector certifications vary, based on where you live. Not every state requires home inspectors to be licensed, and licenses can indicate different degrees of expertise. ASHI lists each state’s requirements here.
  • How long have you been in the business? Look for someone with at least five years of experience — it indicates more homes inspected.
  • How much do you charge? The average home inspection costs about $315. For condos and homes under 1,000 square feet, the average cost is $200. Homes over 2,000 square feet can run $400 or more. (Figures are according to
  • What do you check, exactly? Know what you’re getting for your money.
  • What don’t you check, specifically? Some home inspectors are more thorough than others.
  • How soon after the inspection will I receive my report? Home inspection contingencies require you to complete the inspection within a certain period of time after the offer is accepted — normally five to seven days — so you’re on a set timetable. A good home inspector will provide you with the report within 24 hours after the inspection.
  • May I see a sample report? This will help you gauge how detailed the inspector is and how he or she explains problems.

Show Up for Inspection (and Bring Your Agent)

It’s inspection day, and the honor of your — and your agent’s — presence is not required, but highly recommended. Even though you’ll receive a report summarizing the findings later on, being there gives you a chance to ask questions, and to learn the inner workings of the home.

Block out two to three hours for the inspection. The inspector will survey the property from top to bottom. This includes checking water pressure; leaks in the attic, plumbing, etc.; if door and window frames are straight (if not, it could be a sign of a structural issue); if electrical wiring is up to code; if smoke and carbon monoxide detectors are working; if appliances work properly. Outside, he or she will look at things like siding, fencing, and drainage.

The inspector might also be able to check for termites, asbestos, lead paint, or radon. Because these tests involve more legwork and can require special certification, they come at an additional charge.

Get Ready to Negotiate

Once you receive the inspector’s report, review it with your agent.

Legally, sellers are required to make certain repairs. These can vary depending on location. Most sales contracts require the seller to fix:

  • Structural defects
  • Building code violations
  • Safety issues

Most home repairs, however, are negotiable. Be prepared to pick your battles: Minor issues, like a cracked switchplate or loose kitchen faucet, are easy and cheap to fix on your own. You don’t want to start nickel-and-diming the seller.

If there are major issues with the house, your agent can submit a formal request for repairs that includes a copy of the inspection report. Repair requests should be as specific as possible. For instance: Instead of saying “repair broken windows,” a request should say “replace broken window glass in master bathroom.”

  • If the seller agrees to make all of your repair requests: He or she must provide you with invoices from a licensed contractor stating that the repairs were made. Then it’s full steam ahead toward the sale.
  • If the seller responds to your repair requests with a counteroffer: He or she will state which repairs (or credits at closing) he or she is willing to make. The ball is in your court to either agree, counter the seller’s counteroffer, or void the transaction.

At the end of the day, remember to check in with yourself to see how you’re feeling about all of this. You need to be realistic about how much repair work you’d be taking on. At this point in the sale, there’s a lot of pressure from all parties to move into the close. But if you don’t feel comfortable, speak up.

The most important things to remember during the home inspection? Trust your inspector, trust your gut, and lean on your agent — they likely have a lot of experience to support your decision-making.

That’s something to feel good about.


elps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible.

What You Should Really Know About Browsing for Homes Online

What You Should Really Know About Browsing for Homes Online
Man on laptop

What You Should Really Know About Browsing for Homes Online

Oh, let’s just admit it, shall we? Browsing for homes online is a window shopper’s Shangri-La. The elegantly decorated rooms, the sculpted gardens, the colorful front doors that just pop with those “come hither” hues.

Browser beware, though: Those listings may be seductive, but they might not be giving you the complete picture.

That perfect split-level ranch? Might be too close to a loud, traffic-choked street. That handsome colonial with the light-filled photos? Might be hiding some super icky plumbing problems. That attractively priced condo? Might not actually be for sale. Imagine your despair when, after driving across town to see your dream home, you realize it was sold.

So let’s practice some self-care, shall we, and set our expectations appropriately.

  • Step one, fill out our home buyer’s worksheet. The worksheet helps you understand what you’re looking for.
  • Step two, with that worksheet and knowledge in hand, start browsing for homes. As you do, keep in mind exactly what that tool can, and can’t, do. Here’s how.

You Keep Current. Your Property Site Should, Too

First things first: You wouldn’t read last month’s Vanity Fair for the latest cafe society gossip, right? So you shouldn’t browse property sites that show old listings.

Get the latest listings from®, which pulls its information every 15 minutes from the Multiple Listing Service (MLS), regional databases where real estate agents post listings for sale. That means that®’s listings are more accurate than some others, like Zillow and Trulia, which may update less often. You wouldn’t want to get your heart a flutter for a house that’s already off the market.

BTW, there are other property listing sites as well, including Redfin, which is a brokerage and therefore also relies on relationships with brokers and MLSs for listings.

The Best Properties Aren’t Always the Best Looking

A picture, they say, is worth a thousand words. But what they don’t say is a picture can also hide a thousand cracked floorboards, busted boilers, and leaky pipes. So while it’s natural to focus on photos while browsing, make sure to also consider the property description and other key features.

Each® listing, for example, has a “property details” section that may specify important information such as the year the home was built, price per square foot, and how many days the property has been on the market.

Ultimately though, ask your real estate agent to help you interpret what you find. The best agents have hyper-local knowledge of the market and may even know details and histories of some properties. If a listing seems too good to be true, your agent will likely know why.

Treat Your Agent Like Your Bestie

At the end of the day, property sites are like CliffsNotes for a neighborhood: They show you active listings, sold properties, home prices, and sales histories. All that data will give you a working knowledge, but it won’t be exhaustive.

To assess all of this information — and gather facts about any home you’re eyeing, like how far the local elementary school is from the house or where the closest Soul Cycle is — talk to your real estate agent. An agent who can paint a picture of the neighborhood is an asset.

An agent who can go beyond that and deliver the dish on specific properties is a true friend indeed, more likely to guide you away from homes with hidden problems, and more likely to save you the time of visiting a random listing (when you could otherwise be in the park playing with your canine bestie).

Want to go deeper? Consider these sites and sources:

Just remember: You’re probably not going to find that “perfect home” while browsing listings on your smartphone. Instead, consider the online shopping experience to be an amuse bouche to the home-buying entree — a good way for you to get a taste of the different types of homes that are available and a general idea of what else is out there.

Once you’ve spent that time online, you’ll be ready to share what you’ve learned with an agent.


elps consumers make smart, confident decisions about all aspects of homeownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible.

Tips for Investing in Rental Properties

Tips for Investing in Rental Properties
Real Estate Investing

Tips for Investing in Rental Properties

Investing in real estate has great potential for passive income. It can also be part of your retirement planning by selling the home and getting a big chunk of equity.

It also comes with risks.

So we wanted to share with you some of the things that we have learned when it comes to knowing our local real estate market and the real estate agents who specialize in working with real estate investors.

Know what’s happening in your area

Are people moving into your area because of job opportunities? Are people retiring there? Are you in a vacation area where you can buy short-term rental homes? Do you want to buy a duplex or four-plex home, live in one of the units and rent out the others?

Understand the costs involved

In addition to a mortgage payment, taxes and insurance, you will need to budget for repairs, landscaping/snow removal.

Long-term or short-term investing 

Investing in real estate can help you build your wealth over the long term. Or buying fixer-uppers and selling them immediately can give you more cash over the short term. You will need to decide which one is right for you.

Know all of your financing options

The mortgage rules are different in regard to the down payment, the closing costs and interest rate. We can help you decide which loan program would be the most advantageous for you.

Know your numbers

Cash flow and income tax rules can benefit you when you invest in real estate. That’s where a great accountant/CPA can help you determine if the numbers work for you and your tax bracket. (We can recommend one to you.)

Build your own real estate investment team

Even if you are only considering buying one or two rental properties, it’s best to work with people you can rely on to give you good advice. A real estate agent who specializes in working with investors (We can recommend some to you), a property management company (if you don’t want to manage your own), and a network of contractors who will help you if the home needs to be repaired.

If you are interested in exploring the possibility of investing in real estate, please let us know and we can set up a time to talk.

*American Financial Network, Inc. is not acting on behalf of or at the direction of the federal government, and this offer is not being made by an agency of the government. AFN is not a tax or financial advisor, and individual tax circumstances may vary. Please consult a licensed tax professional and appropriate government agencies to determine tax consequences of home ownership.

What Happens When Your Appraisal Comes in High…or Too Low

What Happens When Your Appraisal Comes in High…or Too Low
Appraisal High or Low?

What Happens When Your Appraisal Comes in High…or Too Low

When buyers and sellers come to an agreement on the price of a home, it’s the end result of the lowest the seller is willing to accept and the highest the buyer is willing to pay. During negotiations, the offer and counteroffer can go back and forth until an agreed-upon price is reached…or not. That’s the true market value at work. When you first work with your real estate agent and go over the list of things you want in a home such as how many bedrooms and baths or the school system or the commute to your work, you’re provided with a list of homes that meet your criteria. Working with your loan officer you also get your preapproval letter in your hand, knowing how much you want to borrow and what your monthly payments will be. Your preapproval letter essentially means your financing is all lined up and all that’s missing is a property address.

Sometimes, and this is often the case with first-time buyers, the “perfect” home comes on the market and has everything the buyers are looking for. In their eagerness to get the home and be the lucky bidder, they might make an offer that’s over and above the asking price. And while the sellers are happy to take that offer, there might be an issue with the appraised value.

When an appraiser accepts an order to appraise a property, a copy of the sales contract is provided. In the instance of a refinance application, the homeowners list what they feel the property is worth directly on the loan application. But this is only the starting point for the real estate agent. Upon receiving an appraisal order, the appraiser will first do a bit of homework, researching public records regarding the sales prices of similar homes in the neighborhood that have recently sold. The appraiser will look at three to four homes and select the best ones that are most like the subject property. Then, the appraiser comes up with a price-per-square-foot value and proceeds to make certain adjustments.

Very rarely are two homes exactly alike in the same neighborhood. They might look similar but there are differences, some small and some not so small, between then. One might have a bigger lot or one might have more trees or a swimming pool. Maybe there’s a three car garage instead of a two car garage. Inside, one house might have an upgraded kitchen or recent master bath remodel. Someone could have added an extra bedroom and added more square footage to the house. The condition of the homes will also be noted and the appraiser can make adjustments for that, too.

Appraising a property for purchase

When appraising a property for a purchase, it’s common for the sales price on the contract to match the appraised value. After all, everything being equal, it’s an agreed upon price which in turn reflects current market values. But sometimes they don’t match. Sometimes the appraised property value is higher than what appears on the sales contract and sometimes the property is appraised at a lower value. During the course of a refinance when the value comes in higher, it can mean a slightly better interest rate if the loan program being selected is priced partly on the loan amount compared to the property value. Lenders refer to this as a “loan level pricing adjustment.” Or, in the instance of a cash-out refinance, a higher appraised value can mean more cash to the buyers at closing.

In a purchase transaction, a higher appraised value doesn’t have much of an impact. When evaluating a loan application lenders will use the lower of the appraised value or sales price. This means when the value comes in higher than the contract price the buyers can’t automatically use that newly found equity as part of their down payment. All it says is that the buyers probably got a better deal than they thought as their accepted offer was lower than what similar homes have recently sold for in the area. In the instance of the appraised value coming in lower than the offer, then the impact is greater.

Let’s say someone makes an offer on a home for $200,000. The appraisal is ordered and after a few days is returned to the lender. The value according to the appraisal is $190,000, not $200,000. What happens? Because the lender uses the lower of the sales price or appraised value, the loan basis is on $190,000. This means the buyers must come to the closing table with the additional $10,000 difference. Or, the buyers can go back to the sellers and renegotiate the price. Most sales contracts today have an addendum that allows the buyers to back out of the deal if the property doesn’t appraise at contract price without penalty and get their earnest money deposit back. If the sellers decide not to renegotiate, the deal is canceled and the buyers start looking for another home.

When an appraisal comes in high it can indicate a rather robust real estate market and when it comes in low it can indicate a faltering one. Either way, the lower of the two values is used when processing a new loan application. Again, lower or higher values are the exception in most markets and not the rule. Yet by working closely with an experienced real estate agent who knows the market well, your offer will likely be spot on.

Ideal Lending Solutions has locations across the great state of Florida to assist you.
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