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Eyes Wide Open

My trilogy is not the Hobbit.  The Hobbit is entertaining.  My trilogy might save you large dollars.  Parts 1 (Don’t assume the real estate system will protect you.) and 2 (Don’t assume the agent has your best interests at heart) spoke to the false assumptions.  Like the Hobbit, a fantasy.

What about Part 3 of the trilogy?  A lender will not make a loan unless the home value is substantiated by an appraiser.   Isn’t the appraiser a real estate Wizard who protects home buyers?  Seamus will speak to that as told to me.

A few weeks ago Seamus attended an appraisal seminar held for real estate agents.  The speaker was a former appraiser.  As best as could be determined, the purpose of the seminar was to teach agents how to address low appraisals, that is, how to obtain higher values needed to complete a loan and a sale.

Part 1 noted that a couple – an accountant and professor – paid $100,000 more for a condominium than it was worth.  How do I know that?   The unit was exactly the same as another that sold 5 years ago for $100,000 less.  Values haven’t gone up 28+% in the past 5 years.   Also the area median price for similar condominiums sales was $376,000.    The purchase appraised for lending purposes and the unit sold.

The agents attending the seminar, excepting Seamus, were traditional real estate agents.  At one point in the seminar the speaker asked the agents to write their state representative to stop legislation that would keep appraisers from being able to use the same home on two appraisals – but treat the home differently if needed to support the purchase price.

Seamus asked, “If it’s the same house why would it be looked at differently?”  The question was avoided.  Isn’t it just such practices (agents nudging appraisers) that contributed to the real estate bubble and problems that followed?  While there were other examples, this example says enough.   I am not picking on appraisers or agents.  They have their jobs to do.  I am suggesting home buyers enter the buyer process with their Eyes Wide Open.

I can’t recall in 27 years as an Exclusive Buyer Agent firm (1,500 home buyers) that we’ve ever had an appraisal issue on a purchase.   This is so because we prepare a market analysis of value (though we are not appraisers) before an Offer to Purchase is made.  That analysis tells us what a home is worth – not what a seller may hope to get, or an agent may want, or an appraiser be gamed into providing.

I’m convinced – convinced – that with proper representation and buying process, the buyer of the condominium referenced would not have spent the $75,000 – $100,000 more than the condominium was worth.  The problem was with the buyer.  The buyer made assumptions and did not take the time to get objective answers.  I’ll not blame the real estate agent.  The agent did his job and sold the condominium for the highest price possible.

To illustrate this, recently Seamus prepared a market analysis for a client.  The information suggested a value of $275,000-$279,000 (listed at $299,000).  Our client made an Offer and it was not accepted.  Our supposition is that the home sold for asking price or more.  We shall keep working with our client to find a home at value.  In the end we provide information and our client makes the decision.

My intent is not to claim we are better than anyone, but I will claim our process does indeed serve the interests of home buyers.  The traditional system serves the interests of sellers which is why the buyers of the condominium $75,000 – $100,000 lighter in the pocket than they needed to be.

On that transaction the real estate agent made money; the lender made money; the appraiser made her fee; the sellers made money (boy, did they!) and they buyers…have a condominium.

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Homebuyer Associates
1835 N. Riverwalk Way
Milwaukee, WI 53212
Phone: 414-254-4129