Another real estate related question

Adrian Bishop is wonderful. I definitely recommend tagging along for the inspection as he will give you info about the little things you might want to take care of or use as a bargaining tool. He's also really nice. I highly recommend him.

Mell:

I'm curious....why are you looking for an appraiser?

Checking with a realtor will provide the "sold" prices for houses in the area that you select. If you're looking for a condo a realtor or the owner's association manager can provide that info.

F.I.

Hi Onika and FI,

FI:

As a subscriber to the Island News, I do have (more or less) all of the prices, dates and addresses of houses and condos sold on STT for the past 8 years. This information is readily available to subscribers on their website.

Frankly, what I see makes me a bit nervous -- especially when I look at the HUGE price jumps over the past few years. I had a thought that perhaps I should try to get an independent, professional opinion as to what might be "rational pricing" before we make an offer on something, but it is just one idea I have.

Anyhow it is an idea that I am exploring, even though I am not yet sure if it makes sense to do this or not. Thanks for the feedback :).

Onika:

Thanks for telling me more about Adrian Bishop. He seemed like a really good guy. Now I am certain that we will use him when the time comes.

Mell 🙂

Mell:

Forgive me, but it sounds like you're getting "Analysis Paralysis".

You can only analyze something so much.

Advice.....if you see what you like make a low offer, say 30% below asking price...the worst that can happen is that they say no. Then if you're still interested...raise the offer a bit. This, of course, assumes that you're not looking for an investment property. In that case other considerations come into play.

F.I.

Hi FI,

LOL :)!

Yes, I probably am getting AP!

Good advice re: offer. This sounds like an excellent strategy.

Thanks :),
Mell

There are a limited number of appraisers on each island. If you get a loan to purchase a property, the financing company will have a list of appraisers they have approved. You can request one of the appraisers on that list, but some appraisers are busier than others and might not be available just when you need them.

For buyers who pay cash for a property or when the seller carries the financing, appraisals are not required. You can choose to save the $$ and not get an appraisal, or you might want to have one done anyway for your own peace of mind that you aren't paying more than you should for a property.

In hot markets like we've been in lately, appraisals often lag behind market values by a few months (as far as the speed at which the values rise according to the appraisers) since that's about how long our closing process takes. For example, if condos at a complex sold for a while at 100K and then the market went into an upswing, prices might rise to $125K in the MLS and buyers might be happy to pay that... but the appraisals are still going to come in at $100K and then maybe $110K for a couple months until a few properties actually CLOSE at $125K. Then the appraisers have those sales as comps to justify raising the value on their appraisals. This continues in increments as the market rises. Cash sales help move the market upwards, as those buyers don't need comps to get a loan and whatever they are willing to pay becomes the new baseline for the next series of appraisals.

Unfortunately, I don't know any of the appraisers or inspectors on STT. I have a couple good ones to recommend on STX for people in the market here.

Mell - regarding your interest in having an appraiser tell you what to bid for a house.... the appraisers must be coming up with appraised values that match or exceed the sales prices for any homes that are being purchased with mortgages. So if you know what the comps are in an area, you know what an appraiser is seeing and using to evaluate a property for the bank. You will be paying an appraisal fee as part of your loan closing. I doubt you really want to pay up front for another pre-appraisal. If an appraisal comes in lower than your negotiated price, that re-opens negotiations and your lawyer will be pushing the seller to drop the sale price to match the appraisal.

Technically, the appraised value is supposed to equal market value... which is "what a buyer is willing to pay and what a seller is willing to accept when both enter into the agreement freely without outside reasons that force them to do so". Divoce and death often force sales below market value and aren't really supposed to be used as comps. Rising prices in a booming market are valid examples of market value.

You can ask a realtor to give you recent sales that are similar to a property you want to make on offer on. Appraisers look at comparables when they are doing an appraisal. Your realtor should be able to give you this information. It is difficult on St. Thomas if it is not a condo because sales in some areas are not plentiful and it is hard to find comparable homes. But - a good realtor can find comparables for you. Just make sure you ask for SOLD properties. Appraisers on St. Thomas - Fred Warden, Shep Barrows. You will pay $400-$600 for an appraisal.

Call Fred Warden at 340-776-8139. He does my appraisals and has been great to work with and I've never waited more than a week to have them turned around. Avoid "By George!"appraisals.

Appraisers typically have a 5% margin to use to meet the purchase price with existing comps. No two homes on the island are alike (even with the same floor plan) so there are a myriad of adjustments they make, based on their experience and industry knowledge, to come up with a price based on the recent sales activity of "similar" homes. However, their work is also reviewed by the lender, and if it is suspect it will not be acceptable, or a second appraisal will be required.

Generally, a good realtor can give you an idea what the market value for a home is, and the appraisal will be especially valuable if you are paying too much, as was suggested earlier.

Almost always an appraiser gets involved AFTER the home is under contract.

I have also seen some realtors not submit "low ball" offers, and suggesting it is insulting to do so. Don't be afraid to insist.

BTW, it is also as important to get pre-approved with a lender. This is not a practice that VI realtors seem to require before they will contract on a purchase. Sometimes you escrow deposit is in jeopardy if the financing does not come through.

Hi Alexandra, Glynnswife and Island Ed,

Some more terrific information, advice and contacts!!!

Thank you all SO much :)!!!
Mell

We Have a signed contract and our financing was approved. This all began mid May. We are waiting on the appraisal right now. The finance company ordered it. They ordered it after the building inspection was complete and title search done, and the loan was approved. There is also an as is building survey and another survey the seller does. Plus the termite insp. All of these passing (or being up to par) should be written in as contingencies in your purchase agreement for receipt of earnst money back (if something is not). Pain in the hiney though and talk about pins and needles!
Also we offered approximately 20% less than the origanal asking price and the seller accepted this amount. It is suprising what may happen but this saved us a lot!
We weren't sure about the appraisal question either. When we found out it would be done through the financing company as part of the final approval we waited. Why pay twice. I also don't believe the seller would want to screw around with an appraiser coming in before an offer is even accepted. Why would the seller? It could be bad that the seller finds out the property is worth more than being asked, than not accept an offer and raise the price on the listing.
All I can say is I'm in 'yipes' mode.
Hoping for end of July closing and a bottle of champaign in my new kitchen by August 1 (YIPES)
Eve

Eve,
You stand a good chance the appraisal will come in higher than your purchase amount if the listing was anywhere near the market price. Good for you as you immediately made some equity.

One caveat... after you close, your lower contract price is now a new 20% lower comparable for the next buyer of a similar property.

Also, just a factoid... the lender orders the appraisal and they OWN it. You pay for it, and are entitled to a copy of it, but the lenders name will be on it. That is why they make you pay for it up front, otherwise if the deal falls apart and you haven't paid for the appraisal, they will still have to pay the appraiser for his work.

I hope your loan closes smoothly.

Regards,

Island Ed

Sorry about lowering the market value for the next seller. The good thing is that it is the Gallow Bay area and I see property values improving as the boardwalk and marina progect get off the ground. Of course we're hoping that it is a good investment in future but not holding my breath because of all the variables. We hope to be in this house for years.

If the appraisal is to come in at or lower than our purchase price I'll be disappointed. Beginning with more equity than our money down on the loan will be nice.

The monies for the appraisal was required right away and cashed right away. The appraisar did not even schedule the appointment until the money was deposited into the account. Not a big deal. Although, that does remind me to send a check for the biulding inspection.

I don't think your appraisal will come in lower, but if it did, I hope you can renegotiate. Although I mentioned the new comp will be less, most appraisers will look for other comps that support the value and ignore that one. The entire island is effectively a neighborhood in the VI as compared to the states, so looking outside of your street or area for a comp is common.

Don't forget the check for the survey!

IE,
Is it quicker for money order or a cashiers check? Also your suggestion on monies at closing since your in the biz... BTW, I looked into if anyone was advertizing on the board for financial services - Have you?

For the appraiser or other services required to be paid up front, you can provide either, even a personal check if they will not hold up the order until it clears. For closing, WIRE the money as the local banks will not process a money order or cashiers check in a timely manner. I also suggest you wire $500-1,000 more than will be required for close as last minute issues can come up (i.e. the seller comes to close with a receipt for HOA dues the lender had prepared to pay from the proceeds). It is often easier to cut a check from the excess than redo the paperwork for one item, and you will have a check cut back to you if nothing comes up. Your attorney for the lender will inform you of the wiring arrangements.

BTW, you do not have to be on island to close. I've recently had a closing delayed because the sellers attorney insisted the sellers be on island to sign the docs. The buyers lived about 2 miles form the sellers in New York and everyone could have signed there. That was really stupid and expensive.

Though I've not ruled out advertising here, to date I've not advertised here because as a regular contributor I do not want to be perceived as exploiting the board for business gain, and I want the freedom of speech it affords me here. I also work almost exclusively by referrals. I just may rethink this again since you have brought it up. Thanks.

In the meantime, if you have any questions specific to your purchase, just PM me and I'll help if I can.