So you finally found the perfect property that a tired landlord wants to sell. You have to wonder why they trying to sell. Do they want to upgrade their property with a 1031 exchange, have all the money they need selling you a ready made money machine, or has the tenant taken control and is now driving them nuts?

You are going to want to get copies of existing leases, statements of security deposits, move-in inspection reports, rent rolls for the last year, tenant contact information, tenant applications, expenses for the last year and any warranty information for warranties in place. Some buyers even go to the extent of getting statements from each tenant as to their interpretation of their obligations under the current lease. To do the latter, you will need the seller’s permission to contact the tenants and they may not want them to know the property is selling.

Once you determine the situation and if you still feel good about going forward you then need to consider a few things. What you do next will make all the difference in the world in your cash flow going forward. If the house is rented, after reviewing the existing lease, you will want to include language in the purchase agreement about receiving current months rent and security deposit at the closing. We make the leases attachments to the purchase agreement.

We like to close on the fifth of the month, and request the seller to pay us the full monthly rent at closing. It then leaves the issue of rent collection to the seller if the tenant is late with their current months rent. It also minimizes the amount we have to come up with at closing.

The rent roll will give you payment history so you will know up front which tenants pay on time and which are habitually late. For the ones with the bad habit, you will know to take immediate action when they are late with their payment so they will know you mean business.

Last years expenses will include payments made to service providers. The list may reveal that you have to pay certain utilities such as water & sewer of trash pick up and this information may not have been mentioned by the seller in the negotiations. The last thing you want at the purchase is the seller canceling a service and the tenant being without water or trash pick up.

You will need to send a letter of notification to the tenant of the change of property management, the date of change, where to send future payments, who to call with maintenance issues and the bank account number where their security deposit is now being held. You can use this occasion to reemphasize your expectations of the tenant’s performance under the existing leases.

Use the transition of property manager to meet with the existing tenants and find out if anything is in need of repair. This goes a long way toward good will, and it gets you into the property to do a quick inspection.

Handle the transition in a businesslike manor; remember now you are in the property management business.

With the present downturn in the market and home prices dropping faster than a lead balloon, I thought it best to share with you what I’ve learned regarding property appraisals.

Here is the cold, hard truth on valuations and what appraisers will NEVER tell you. Keep these points in mind on every loan you do.

1. Cosmetic stuff such as paint, new carpets, window treatments, etc. do not increase appraised value, they only increase the perceived value of the property from the viewpoint of the buyer. Yes, cosmetics will affect your asking price and what the buyer is willing to pay, but it will NOT increase the intrinsic value of the house on the appraisal report. It also won’t get a customer out of PMI if you try to refinance him and all he has done to improve the property is wallpaper and paint. Lenders are much savvier than this and (if the time period has only been a year or two and prices haven’t increased) will require “significant” property upgrades to kick off PMI, not just cosmetic effects. Remember this.

2. Also, high end appliances such as sub-zero freezers and granite counter top upgrades do nothing to increase value on the actual appraisal report. And even if by chance they do, it will be very, very low and insignificant. Yes, some appraisers will try to tell you that they took the upgrades into account when determining value, when the real reason is they didn’t. Appraisers just say that, because it’s the borrowers who belly ache with “well I put all this work into the house, and surely my shiny new stainless steel appliances added some value, didn’t they?” Of course they did. *wink* *wink*.

3. On condo’s, the appraiser must first look within the same complex development for comparable properties BEFORE looking elsewhere to justify a value. That’s because lenders want to know what other units next to it have sold for, and most likely, these units are all similar in nature and have a common historical precedence for valuation.

4. If the appraiser goes outside the normal mileage boundaries of the area to search for comparable properties, there must be a valid and overriding reason given. And this reason must be CLEARLY articulated and stated on the appraisal report. Failure to do this and you risk having the appraisal report kicked back to you from underwriting and requesting additional comparables. (This delays the closing, risks your interest rate lock and may even kill the whole deal!)

5. Carefully watch your hits and adjustments on the rate sheet and beware of pricing bumps because of a low appraisal. If the “loan to value” on the property is too high and the customer is taking cash-out, then this WILL affect the interest rate and–more importantly–your income! On the other hand, if the appraisal comes in higher making the “loan to value” lower, you can either keep the extra yield spread you earn or pass the savings onto the customer and lower their interest rate or reduce some of the closing costs. If you do nothing, you can simply use this additional “found capital” as additional leverage to make yourself more competitive with the borrower. As the deal progresses, you may have to bargain and cut your fees to save the loan. Keeping a bit of padding, gives you a way to make amends without losing your shirt!

6. Keep in mind that appraisal values are a moving target and that the appraiser can only go back so far to pull out comparable properties, typically no more than 3 to 4 months. Anything longer and the bank will condition you for it and ask for more comps. Again, you don’t want to delay the closing and risk losing your commission.

7. Any value that is given to a home is only as good as the value of the other properties surrounding it. If the market is in a downward trend (as we are today), then the prevailing prices will be downward. Duh?! Customers don’t like to hear this. Everyone thinks they are sitting on a “goldmine” and I can’t even tell you how many BBQ’s I’ve been at where so-and-so is bragging about how much their house is worth. You can imagine the shock on their face when they try to refinance and get the appraisal report. That alone is enough to deflate their enthusiasm. Sorry to spoil the party, Mr. Customer, but all value is subjective and only as good as what someone else is willing to pay.

8. Tell customers, that no matter what the property value comes in at, you have absolutely no control over it. Appraisers are independent third parties and their opinion is usually firm. They are bound by legal, ethical and moral obligations and could lose their license if they stray too far beyond the guidelines. They could lose their job!!!

9. If customers doubt the appraised value and think it should be higher (again the goldmine mentality), tell them that it is up to them to get a second opinion if they choose too. However, be sure to tell them that it will cost them another appraisal fee (this usually is enough to stop them cold in their tracks!). Reiterate the points mentioned above. You are acting as their trusted advisor so they should heed your advice.

10. As a last resort, you could call the appraiser and see if they may have overlooked something on the report such as significant upgrades (meaning finished basements, porches, attics, additional rooms, etc.) Also, are there any other recent sales in the area that you know of? Could the appraiser use one of those comparable properties instead? Maybe this will help you get to the value you are looking for. Maybe not.

Remember when working on loans you need to set expectations with the borrower. I always tell customers that no matter what they “think” the property is worth we actually have no idea until an independent third party takes an objective look at it. It’s no use trying to guess and speculate!

When someone tells me the value of their home I take it with a grain of salt because I know that most likely the appraisal will come in far less than they think…and I price my loans accordingly. I suggest you do the same. Listen to your gut instinct and never just take the borrowers word for it.

I hope the above tips regarding appraisals help you in this ever changing market. If you want to survive you’ll need to adapt and become your customer’s best friend. The better educated you are about the mortgage process, the less fall-out you’ll have and the more loans you’ll ultimately close.

 

The world of buying and selling of homes and property is inflating in a regular tandem with the time. With options for free and relevant data over the internet is making a northward go, any one can expect for a quick service from ones in the business to help in finding a desired locations. Much to the satisfaction, real estate professionals are breaking the traditions and have connected with the emerging technology to reach out to a large number of people who might be interested in property dealings.

The triple benefits of a fluctuating market, legal pressure and improving competition has laid huge pressure on real estate professionals to make information related to a property more detailed and open online. The emerging situation has brought in better services for interested property buyers. The phenomenon presages to increased and detailed listing of properties with a broker and make all of them readily available for buyers to see.

Nowadays, real estate agents confer to real estate listing in creating successful business deals. Their decision understandably stems from the growing participation of construction companies in listing their projects.

Real Estate Listings are Important for Realtors

Real estate listings are essential if you have just started your career as a realtor. It is mainly because of the fact that a full-fledged listing helps in providing a thorough information for buyers as well as for sellers to consult.

Listings add value to the credibility of a real estate agent and satisfy the curiosity of the interested property buyers and sellers. For example, if a buyer visits the page and likes the listings displayed there, he will feel secured and confident of approaching the services of the website and the realtor thereby.

Are you an interested buyer or seller? Find a website that offers a real estate listings that suits your needs best.