Now, more than ever, buyers and potential buyers need to get educated on the home buying process. The rules have changed over the past several months and things like appraisals and home owner ass. can make or break your home purchase. Because Las Vegas has had so many foreclosures, appraisals are coming in lower than expected. As an example, if you make an offer on a home for 300,000 and the appraisal comes in at 290,000, your loan will not go through unless the seller reduces the price or you pay the difference out of pocket. One of the reasons we are seeing lower than expected appraisals is because the criteria has changed for the Appraisers. They used to go back 6 months to compare sales prices and use that information to arrive at the current market value. This time frame is now reduced to 3 months and if the community has not had any sales in that period of time, the Appraiser has to go outside the area to get the data. The rules state that Appraiser can only go out one mile from the subject property. In many cases, the homes outside the subjects community are not similar and do not reflect the true value of the property. A good example would be if your home was in a new upscale gated community with upgrades.

There are no resent sales over the past 3 months so the Appraiser has to use sales up to a mile away to compare value. Most of the homes outside your gated area are older and don’t even come close. The Appraiser has no choice and will compare your home to these and there is a good chance that the appraisal will be lower than expected. You know that the value at your purchase price of 300,000 is there and the home sold for 675,000 in 2005. Your Realtor did the comparables in the community and 4 months ago a similar home with less square footage sold for 325,000. Never the less, the appraisal comes in at 290,000. If you can’t get the seller to drop the sales price or you are not willing to pay the difference out of pocket, the sale will not go through. This can be a very frustrating situation and also very common in this current market. Make sure that you are working with a Realtor that is very familiar with the current market conditions and can look out for your best interests. Here are a few tips that will help.

• Make sure your Realtor has negotiated a “due diligence period”.
• Meet with your loan officer right after the offer is accepted and find out if the comps are in line with the sales price.
• Appraisals are expensive, ( 300 to 900 ) and the buyer pays.
• Be prepared to walk away if the seller is not willing to lower the price to the appraised value.
• Check the HOA rules and updated information to make sure there is no litigation. Most lenders will not do a loan on a property in litigation.