For our first “House of the Month” in 2019, we’ve selected this lake home at Douglas Lake.
If you’d like to schedule a visit to this lake home, call me at 865-765-6157 or my support line at 865-654-2111.
Our featured “Cabin of the Month” is this amazing investment cabin located in Sherwood Forest resort!
To schedule a showing at this investment cabin, call our office at 865-429-2121 or my support line at 865-654-2111.
Inside the custom built home
To schedule a showing at this custom built home call me at 865-765-6157 or my support line at 865-654-2111.
When buying a home or vacation cabin, one of the most crucial steps in the process if you’re working with a lender is the appraisal. Appraising the value of a property can be one of the most challenging, and probably the most stressful, aspects of the process for buyers. This can be especially true in a market where appraisal values don’t reflect where the market is at in terms of purchase value. As I discussed in last month’s article, this is mostly because lender appraisers are looking at the value of the property in a different way than everyone else, and with a different purpose. The purpose of a lender appraisal is to determine how much the lender can sell the property for in the event of a foreclosure. So even though the buyer is paying for the appraisal, the appraiser making the determination is actually working for the lender.
In our market, as we continue to work with a low number of properties for sale, the sales price of cabins has continued to rapidly increase over the last 12 months. We’ve seen a slower pace on our local residential market, but home values are also increasing. If you as a buyer have an appraisal that comes in under the offer price, that doesn’t mean you won’t be able to buy the home. You and your agent have a few different options to help you work out a solution with the seller.
Ways to address the appraisal
The first thing I tell my buyers when the appraisal comes in lower than the purchase price is, “Don’t panic.” We look over the appraisal report and re-evaluate our own comparable group of sold listings to see if we’ve missed something about the property. An appraiser can go back as far as 12 months, and is required to first use anything that’s sold within the same subdivision or resort community. The appraiser is limited on what he or she can do to review those sold properties. They rely heavily on MLS and tax records, so when those documents aren’t completely up to date, it can skew the data in a way that might hurt your appraisal.
Once we are certain our offer was appropriate for the market, if we’re comfortable with it we will ask the seller to agree to reduce the price to match the appraisal value. Remember, the lender won’t borrow on more than what the home is determined by the appraiser to be worth, so if the seller won’t lower the price then the next choice will be to see if we can split the difference with the seller or simply agree to pay more out of pocket. So for example, if the purchase price is $200,000 but the appraiser determines the value of the property to be $190,000, then you would have to either get the seller to agree to reduce the price by up to $10,000 or work out how to pay that amount out of your own pocket.
As a last resort, we can try to work with the lender to resolve it, but the truth is it is very hard to get an appraisal value overturned once it has been determined. We absolutely cannot pressure appraisers to price the appraisal value of the property at the amount a buyer offers a seller.
Next month, I’ll share some ways I help sellers to price their property correctly so that the appraisal value meets the expectations correctly. In the meantime, if you have questions about appraisals or anything else regarding the local real estate market, I and my staff are always available!
If you love the mountains, you will absolutely adore the gorgeous, up in the clouds Smoky Mountain View from this top Sherwood Forest rental income producing cabin.
If you’d like to schedule a visit or have other questions about how to make rental income with this property, call me at 865-765-6157 or 865-654-2111.
Sevierville home is conveniently located
If you’d like to schedule a time to see this Sevierville home, contact our office at 865-429-2121.
In this article, I’d like to share with you about one of the most important steps in a home sale where a lender is involed – the appraisal.
If you’ve been following my articles over this past year, then you already know our region – the Great Smoky Mountains, including Pigeon Forge, Gatlinburg, Sevierville, and the surrounding communities – are in a season of very low inventory for property sales. This is especially true of our rental and vacation cabin market. As a result, the values of these properties have increased and the market for vacation and rental cabins has climbed steadily over the last couple of years at a rate that has outpaced lender appraisal values.
Appraising the value of a property can be one of the most challenging, and probably the most stressful, aspect of the process for buyers in a market where appraisal values don’t reflect where the market is at in terms of purchase value. This is mostly because lender appraisers are looking at the value of the property in a different way than everyone else, and with a different purpose. The purpose of a lender appraisal is to determine how much the lender can sell the property for in the event of a foreclosure. So even though the buyer is paying for the appraisal, the appraiser making the determination is actually working for the lender.
Appraisal is an art, not a science
As you know, when a foreclosure is put up for sale by a lender, it’s not priced at the market value. It’s priced below the market value because the financial institution is just trying to recoup as much as they can get for the property. So appraisers have to work from that angle in determining the appraisal value for the lender, and they have to follow specific restrictions. They have to find comparable sold listings within the last 3 to 6 months. If the property is in a subdivision or resort, they must use sold properties from that particular location. Obviously, appraisers can’t go into homes that were sold and take a look around. So the most efficient method for them is to look at closed listings in the association MLS, tax records, and any photos that are included with the closed listing report. It’s a difficult job, especially when you begin to understand some of the problems with doing it this way.
First of all, the reports don’t always accurately reflect the condition of the property. Rarely do tax records identify updates to the interior of the property. Sometimes the square footage is recorded incorrectly. The cabin could be smaller or larger inside than the tax record indicates. Regarding MLS records, the photos may be out of date. That pristine looking cabin exterior in the front photo could have been taken a week after it was built… 10 years ago. Today it might be full of bee holes and in serious need of a new staining. So of course it sold two months ago for $15,000 less than the one you’ve made an offer on where the one you want to buy today has been well taken care of and doesn’t need any major updating.
Appraisers also are required to look at square footage differently than the average buyer or seller. A lot of times, people look at the total square footage to determine how big the cabin is. Even when these numbers are correct in the written record, what the lender’s appraiser is looking for is how much is “above grade” and how much is “below grade.” So maybe you picked out a cabin that has a total of 2,000 square feet, but the appraiser who looks at it notices the cabin square footage is perfectly split between two levels. So, the 1,000 square feet above the mountain’s edge in that hypothetical cabin is considered above grade and worth more than the downstairs – even when that lower level has a window facing the perfect mountain view. Any level of the cabin that is 1 foot below ground is considered basement.
So that’s how the appraiser works through the process. In my next article, I’ll share some ways you can handle an appraisal that might come in below the offer price.
When home and cabin owners make the decision to sell, the first thing they want to know, of course, is what the correct sales price for their property should be. Working every day with the market, I watch what’s happening with sales prices and I keep up with the trends of what’s happening. Right now, we are in a sellers’ market due to the low number of properties for sale, so the demand for homes and cabins is continually driving up the sales price.
Before most clients contact me, however, they’ve already turned to the internet for their research into setting the correct sales price. Real estate marketing websites use computer generated figures based on a total sum of properties without any input from a human. So they don’t take into account all the little things that appraisers are going to care about when they come out to see if the lender should finance the purchase. As a result, the internet estimates are generally incorrect. Sometimes, they are too high. Other times they are too low. For cabins, this number is derived by including all the very expensive log cabin construction in our county – lumping every kind of construction together. To the computer there is only one category and it is called “residential,” whether it is overnight rental cabins or true residential like your house. Clients who list with me will ask if the estimated sales price will hurt the sale of the home if it doesn’t match what we have priced it at based on market comparisons that are more “apples to apples.”
Well, here’s the good news, sellers: the online sales price estimate isn’t going to hurt us.
As a matter of fact, we’re going to use it as a marketing tool! We have estimates like this all the time and we make them work in our favor – even though you and I know that the estimate is not accurate (and actually buyers and buyers agents do as well).
In the Great Smoky Mountains Association of Realtors Multiple Listing Service, there is no division for the type of properties we have in Sevier County. If it has bedrooms, it’s a residence – even if it is a 12-bedroom log lodge bringing in an income of $300,000 a year.
The sold numbers that throw this off are our new construction log home cabins which run $170-$280 a square foot. (True residential properties are still running right at $100 a square foot to build.) When the computer picks up these log cabin numbers it just creates estimates that are well, not accurate. It doesn’t fit the programming pattern, so it messes it up. Some computer programs also don’t seem to be able to keep up with the pace of the market, which can be a problem for someone who is selling their house based on today’s sales prices and not on a price from 90 to 120 days ago.
Until we’re all replaced by computers, sellers and buyers still need people who can look at all of the data and not just one piece of it to help determine the correct sales price for a listing on the market.
You’ll be “Steppin’ on the Clouds” in this gorgeous eight bedroom rental cabin in Wears Valley. This is a fantastic income-building investment, on track to pass $170,000 in gross rental income this year!
With its absolutely magnificent panoramic 180-degree views of the Great Smoky Mountains, you and your guests will love relaxing in front of one of the best views of the National Park any rental cabin here has to offer. Enjoy the cabin’s large fire pit or hot tub, or make your way over to the nearby resort at “The Preserve” to go swimming in the pool. Best of all, this cabin is just minutes from the National Park!
You’ll find plenty of activities inside this eight bedroom rental as well, ranging from the cabin’s fully outfitted gaming room with air hockey, foosball, and a pool table (not to mention an arcade game system). The cabin also houses a fantastic huge theater room. The cabin’s design includes handsome tongue-and-groove, gleaming large wood beams, walls of glass, and a stone fireplace centerpiece. It’s the perfect place for a relaxing vacation getaway, and can sleep up to 28 guests.
To learn more about this eight bedroom rental cabin, click here.