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The Basics of Appraisals

Three types of loans are generally available in D.C.

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property appraisal, gay news, Washington Blade
A loan officer will order a property appraisal.

If you’re buying a home, chances are you’ll need a loan to make the purchase. Once you have a contract, your loan officer will order an appraisal of the property.

There are three types of loans generally seen in D.C.: Conventional, Federal Housing Administration (FHA), and Veteran’s Administration (VA). Outside the Beltway we also see United States Department of Agriculture (USDA) loans.

The job of a licensed or certified appraiser is to determine a home’s fair market value. This lets the lender and the buyer know whether the value and the loan amount are in keeping with the what you have agreed to pay for the property.

An appraiser will view the home, take pictures and make notes to later be transposed to the Uniform Residential Appraisal Report and provided to the lender, who will share it with you. In the case of FHA, VA, and USDA loans, the appraiser’s requirements also include a limited property inspection.

Armed with that information, the appraiser will research properties that have recently sold to determine which are closest to the makeup of the home you are buying. Typically, the appraiser will look at properties within a half mile radius that have sold within the last six months and select at least three homes to compare.

Some typical items compared are lot size, square footage, number of bedrooms and baths, exterior features such as patios, decks and fencing, parking availability and features like central air conditioning and fireplaces.

The sales price of each property is the starting point. From there, the appraiser will assign a dollar amount to each item, then add to or subtract from the sold price to arrive at an adjusted sales price for each of the comparable homes.

For example, if the home you are buying has a fireplace and a comparable home has none, the appraiser will add a predetermined value (perhaps $3,000) to adjust the actual sales price of the comparable home to reflect the value if both homes had fireplaces.

Similarly, if the comparable home has two fireplaces, the appraiser will subtract the $3,000 to adjust the home’s value in line with the one fireplace your home has.

Also included are the age of each home and its condition and quality. The condition standards range from C1 (new construction) to C6 (deferred maintenance that affects structure and stability). Most commonly seen in our area is category C3 (well-maintained with some upgrades).

The categories that denote quality are Q1 (individually designed for a specific person or purpose using the highest quality exterior and interior materials) to Q6 (basic quality using lowest cost building materials). Once again, Q3 is what we normally see (higher quality with upgraded interiors and finishes).

Most appraisals will reflect the sales price of your property. If yours comes in above, congratulations! You got a bargain. But what happens if it comes in low?

If you have an appraisal contingency, you have five options: 1) challenge the appraisal, 2) proceed with the sale, adding money to your down payment to make up the difference, 3) ask the seller to lower the price to meet the appraised amount, 4) negotiate with the seller to split the deficit in a mutually agreeable manner or 5) exit the contract and have your earnest money deposit returned.

To challenge an appraisal, review it with your agent and look for discrepancies. Are the comparable homes located in the same area? Are there better homes to compare? Are there errors in describing the houses? Have specific items been properly adjusted?

Your agent can provide any new information to your lender, who will forward it to the appraiser to review and make a final decision. If your challenge is not successful, your agent will help you negotiate with the seller to find the best solution.

So, what’s the worst-case scenario? My own experience, of course. I attempted to purchase my current home four years ago with an FHA loan. I was all excited until the appraisal came back—at $90,000 less than what I had agreed to pay! And because of FHA guidelines, that appraisal would be tied to the property for four months until I could get a new one.

My loan officer provided the solution—change my loan to conventional and order a new appraisal. When I received it, I realized that the first appraiser had made a $50,000 error and used houses that were of much lesser quality as comparable homes. I had been avenged!

Valerie M. Blake is a licensed Associate Broker in DC, MD & VA with RLAH Real Estate. Call or text her at (202) 246-8602, email her through DCHomeQuest.com, or follow her on Facebook at TheRealst8ofAffairs.

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Real Estate

Helpful tips for homebuyers in seller’s market

2021 has been a great year for home sales

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COVID-19 housing market, gay news, Washington Blade

Without question, 2021 was a great year for home sales. Sellers across the country, in many cases, found themselves listing their homes and quickly having not just one, but multiple offers, many of which were at asking price or above. With limited inventory and high demand, it has been an ideal year to sell—and conversely, often a difficult year to buy. Buyers who are interested in a particular home, or even in a specific neighborhood, often find themselves facing stiff competition to have offers accepted. 

Fortunately, this doesn’t mean that many buyers haven’t had successful and rewarding home buying experiences—just that doing so often means making an extra effort and taking helpful steps to make an offer the most competitive that it can be. With that in mind, let’s take a look at a few helpful tips for buyers in a seller’s market:

  • Plan ahead with mortgage pre-approval: While there are certainly a wide variety of strategies that real estate agents and financial advisors may recommend, and while those strategies might vary depending upon the buyer and the circumstances of a particular market, one thing almost all experts agree on is that obtaining a mortgage preapproval is a smart decision. A mortgage preapproval is an ideal way to reassure sellers that a reputable lender has verified your credit and approved your buying power up to a certain limit. If you’re caught in a bidding war with another potential buyer, having preapproval establishing that you are ready, willing, and able to buy just might give you the advantage you need in a competitive market.
  • Be willing to look under budget so you can bid higher: In this highly competitive market, many home buyers find themselves in a situation where they are in a bidding war with another—or even several other—buyers. In that situation, you may find yourself having to make an offer at, or even in many cases, above, the asking price. This means that you may want to adjust your budget—and bidding—accordingly. Choosing to make an offer on a home that has an asking price that is already at the top of your budget may mean that you simply don’t have much wiggle room when it comes to making an offer over that price. Choosing a home slightly under the top of your budget means you’ll have more flexibility to make a bid that is more competitive and likely to be accepted.
  • Consider offering non-price-oriented incentives: Without question, making a highly competitive offer is going to be the key to increasing your chances of having that offer accepted. It’s important to remember that there is more to an offer than just price, however. Buyers may want to consider increasing the appeal of an offer by supplementing it with other incentives beyond just the dollar amount itself. Examples of such incentives might include things like foregoing the seller-paid home warranty that is often offered as part of the process, offering a shorter closing period, not making the purchase contingent upon the sale of a currently-owned home, or other such incentives. Doing so may give you the edge you need to have your offer selected over other competitive bids.
  • Retain the right real estate agent: Often, for LGBTQ buyers, especially in a competitive market, this piece of the puzzle is particularly important. In many, although certainly not all, cases LGBTQ buyers are drawn to specific areas of a city or community where other LGBTQ individuals live. That means that in a market where inventory is already limited and going quickly, there can be even fewer homes available upon which to bid. When that is the case, you will need a real estate agent who knows the community that you’re interested in, and who can quickly help you identify and take action toward making offers on homes that fit your needs. Having the right agent can make all the difference between a smooth and successful home-buying experience, and a stressful one

Jeff Hammerberg (he/him/his) is the Founding CEO of Hammerberg & Associates, Inc. Reach him at 303-378-5526, [email protected] or GayRealEstate.com

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Real Estate

Help, I’m under contract!  They accepted my offer?!

Buyer and seller need to work as a team

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What are the most common questions real estate agents, title companies and lenders get once a client is under contract? Well, luckily on my team we send out a next steps letter to all of our clients once an offer has been accepted and this helps them to know what to do the first week, the second week, and in any subsequent weeks before the settlement.  

For example, the letter will go out and say, “Make sure to get your EMD check to the title company in the agreed upon amount of time.” The EMD is your earnest money deposit, and most contracts have a buyer write a check for several thousands of dollars that will go the title company as sort of a “security deposit” on a contract that later gets applied to the buyers’ closing costs.

The letter will also instruct a buyer to contact their lender and confirm with them that they are under contract and to get the contract over to the lender so they can start preparing the loan and order the appraisal. The letter also states that later in the process the buyer will get the wiring instructions from the title company where settlement will be held for the down payment money. If there is to be a home inspection, we will also get that scheduled, usually in the first week after going under contract also.  

If selling, the letter is a different one with information about moving companies and getting any staging out of the listing. Both parties will receive instructions on how to change the utilities from the seller to the buyer the week of settlement. The title company will also follow up with the buyers and sellers to get any needed info. They will ask any questions necessary to possibly help the buyer to get any deductions or credits they might qualify for that could lower their closing costs. A good lender will do this also.

What each buyer and seller needs is good teamwork to make the dream work whenever a house is changing hands and a large transaction is going to be handled. For more information, you can contact me to attend my next Homebuyer’s Seminar on Oct. 12 in the evening, which will be on Zoom.  

Joseph Hudson is a Realtor at the Rutstein Group of Compass. Reach him at 703-587-0597 or at [email protected].

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Real Estate

Jenn Smira Team fighting to make world a better place

Join us in the fight against cancer

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Elvin Merlo is boxing on behalf of a friend who died of brain cancer.

At The Jenn Smira Team, we don’t just talk about making the world a better place, we fight to make it happen — literally. Case in point: this fall, Elvin Merlo (one of our very own agents) has been selected to fight in the Haymakers for Hope Beltway Brawl. What does that mean, exactly? On Nov. 4, Elvin will compete in a three-round amateur boxing match to raise money for cancer research. Read on to learn more about Elvin’s fight and the cause that compelled him to step into the ring.

A little bit about H4H: Haymakers for Hope is a 501(c)(3) charity organization that gives all of us the opportunity to fight back against cancer. The organization helps others like Elvin train for — and compete in — a sanctioned charity boxing event to raise funds for cancer research, care, awareness, and survivorship. To prepare for each event, they combine the efforts of local boxing gyms and volunteers, and match each contestant up with someone of a similar experience level (even if that experience level is “none”).

The H4H History: In 2009, H4H founders Andrew Myerson and Julie Anne Kelly participated in the New York City Golden Gloves, one of the most highly regarded amateur boxing tournaments in the U.S. After the lights went down, they realized that something was missing, and decided then and there to channel their fighting spirit to raise money for cancer research instead. This planted the seeds for Haymakers for Hope. Today, H4H gives people just like you the once-in-a-lifetime opportunity to compete in their first-ever sanctioned boxing event while supporting a worthy cause at the same time. The experience is impactful, challenging, and life changing, and the march toward a cure continues long after the last match of the night.

Why Elvin Fights: Elvin fights for David Black, his dear friend who recently passed away after a nearly seven-year battle with brain cancer. He was only 33 years old and left behind his wife, Jen, and two beautiful children.

While it’s nearly impossible to capture John in just a few words, the ones that might do it best are perhaps: “I want to be like John when I grow up.” It’s a phrase that his father, John Sr., could often be overheard saying and a sentiment the rest of his family would all be quick to echo.

John was a force. He loved his family and friends above all else and radiated a quiet resolve that comforted those around him. He faced adversity with unflappable courage and never missed an opportunity to elicit a smile with his wry sense of humor, no matter the hardship he faced.

John truly embodied the warrior spirit, which is why Elvin knew there was only one way to honor him: to fight. That’s why on Nov. 4, he’ll step into the boxing ring and join 27 other fighters for a three-round sanctioned boxing event while raising money for cancer research, care, awareness, and survivorship.

Fundraising Specifics: Elvin is raising money for Dr. John Laterra’s research at John’s Hopkins Kimmel Cancer Center. Dr. Laterra oversaw John’s treatment, and is internationally recognized for his clinical expertise and research on the mechanisms of brain tumor malignancy.

Compass Cares empowers agents and employees alike to support meaningful causes right where it counts most: at home. Compass has already pledged $15,000 to support Elvin in his fight against cancer. 

Will you join the fight? Visit haymakersforhope.org to make your donation today.

Jenn Smira is a Realtor and executive vice president at the Jenn Smira Team. Reach her at 202-340-7675 or via jennsmira.com.

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