Buying in Today's Market: Part One, Appraisals

An enormous part of our role in helping buyers today is to help prepare them for the potential pitfalls that may be experienced with our current market conditions. Especially when it comes to unique waterfront properties, buyers need to be informed about the process before writing their first offer. There are a lot of terrific buying opportunities out there and finding the right property can be just the first part of the process.

One item that buyers of waterfront property need to be aware of is the current situation with appraisals. In years past, appraisers were able to make larger adjustments for subjective qualities like water view or property character. With banks requiring more strict parameters, appraisers are now held to quite stringent guidelines that makes it more difficult to account for those "feel" items that are often the reason one property may sell for more than another. Banks are also more strict on the age of comparables used for an appraisal. Ideally, they like to see properties sold within the last 6 months. In an area of the state where the snow begins in November and summer arrives in June, it can be very difficult, especially early in a season to find any suitable comparables. Add to this the fact that, in even the best of markets, only a handful of properties may sell on some of these bodies of water and it becomes quickly apparent that trying to conduct an appraisal that fits within the bounds of what a bank requires can be difficult.

It's important to recognize that, due to these factors, even if a property is worth the agreed upon sales price, an independent appraiser with limited data may not arrive at that number for the bank. In this scenario, the buyer would either have to bring more of a down payment or may have to seek alternate financing. Sometimes a seller will be willing to adjust price a bit to get the transaction together, but there are still a lot of cash buyers out there and the seller may be willing to wait. Most sellers are willing to sell for a fair market value and most buyers are willing to pay a fair market value. Most of our buyers who have successfully purchased their little slice of Northern Michigan understood that we don't sell cookie cutter subdivision homes and some potential hiccups may arise during the closing process. Prepare yourself for the possibility that it may take some patience, creativity and an open mind to get the one of a kind property. Most of our transactions come off without a hitch and we stay actively involved at every turn to help ensure this. It's more likely that you'll find that dream home and will stroll smoothly through the closing process, but think very hard about whether you're willing to pass on that otherwise perfect property because of a bump in the road.