Understanding Appraisal Bridges, Explained

With a continuing hot real estate market, many contracts are written with an appraisal bridge, or appraisal gap, written in. As a buyer this may be confusing and get overlooked when you agree to write this in. Let’s explain what this means and how it will affect your bottom line, or what you bring to the closing table in terms of funds to close.

Your realtor will add a line to the contract that may look like this:

“In the event the property does not appraise for at least the sales price, the purchaser hereby agrees to pay $_______________ over appraised value up to the sales price.”

Depending on the sale price of the property and the amount of money the buyer may have to contribute that blank will vary a lot. What does this mean to you, as the buyer. Well, this amount is the amount above your down payment and closing costs. The bank will only lend on the appraised value, and that’s minus your down payment. Again, the bank will ONLY lend on the appraised value, no matter what you’re willing to pay. This is to protect them, as they are the guarantor of the loan, so if you should be unable to pay, they will be able to recoup their money. I know, seems a little grim, but that’s just business.

So, let’s look at an example of what this might look like. Remember, you’re up against 2 or three others that might be offering contracts on this same property so you’ll want to put your best foot forward if this is the house you really want. Here’s an example of what you might have as a contract and what that looks like at the closing table:

The house lists at $250,000 and it’s fully updated and has everything you wanted, so you’re in love and ready to fight for this one. You offer $275,000 with 10% down and an appraisal bridge of $15,000 (hoping it appraises for $260,000 at least). There are many scenarios here that could happen, for one, it could appraise ‘at value’ meaning $275,000 and you have to come to the table with your original 10% down and closing costs, here’s what that looks like:

  • This estimate is without lenders fees, as they vary and without your appraisal fee, that you paid for and does not acount for taxes that the seller may have pre paid for and from date of closing forward, you will pay them for.

Now, lets say that appraised at $260,000 and you had to bring the $15,000 that you promised to cover that cost. That’s $15,000 above the almost $30,000 you are wiring to close, so that’s $45,000 instead of $30,000.

Make sure you understand this before agreeing to it on the contract. That being said, this is the #1 line in the contracts right now that will get you that sale, so don’t omit it in hopes of paying less for the house, as it’s what’s winning in my market today. If $5000 is what you can bring to the closing table, of $2000, make sure you write it down and commit to it, that amount might win you that contract and get you into that house.

If you have any questions please feel free to reach out to me at middy@arbormove.com and I’m happy to help.

For educational listening, tune into our podcast here, https://arbormove.buzzsprout.com

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5 Favorite Home Design Hacks on a Budget

Leading interior design professionals offer up some of their favorite affordable ideas for sprucing up a home this summer. Courtesy of the Ann Arbor Board of Realtors

You may not have the budget for floor-to-ceiling renovations but that doesn’t mean you can’t still make a big difference to a home’s appearance. Interior designers from across the country respond to the question: What is your favorite summer design hack on a dime? Here’s what they said.

Refresh the Color

Blue Bathroom Vanity
Photo credit: Laurey Glenn

“What works for summer—and all year round, really—is making a statement with color. A fresh coat of paint on the wall or repainting your furniture and adding new hardware offers a renewed look to any room. Don’t be afraid to try cool, summery colors; they create a tranquil mood to the space.” —Mel Bean, Mel Bean Interiors, Tulsa, Okla.

Dark Kitchen Cabinets
Photo credit: Kacey Gilpin

Move Around Accessories

Dresser & Mirror
Photo credit: Molly Culver

“Sometimes the best furniture and fixtures are right under your nose – in your own home. Rearranging your furniture can give the illusion of a new home; all it takes is some creativity. Move your entryway chandelier to your bathroom. Rearrange artwork. Use a living room side table for seating at your vanity. The possibilities are endless.” —Mary Patton, Mary Patton Design, Houston

Bath With Wallpaper and Chandelier
Photo credit: Molly Culver

Add Some Finishing Touches

Plant and Accessories on Coffee Table
Photo credit: Patrick Cline

“Accessorize, accessorize, accessorize. Create intrigue and give richness to a room with bright throw blankets or pillows and add eye-catching lighting fixtures. For summer, I also like to add gold picture frames and mirrors to accentuate white or neutral walls.” —Marlaina Teich, New York-based Marlaina Teich Designs

Accessories on Table and Mirror
Photo credit: Patrick Cline

Try Wallpaper Accents

Vanity and Bathroom Wallpaper
Photo credit: Haylei Smith

“I’m currently loving all of the options for removable wallpaper which can make any room—big or small—look freshly renovated and without breaking the bank. For summer, consider creating an accent wall or wallpapering a powder room in shades of blue reminiscent of clear skies and beach days.” —Lance Thomas, Louisiana-based Thomas Guy Interiors

Highlight the Windows

Light Blue Furniture and Blinds
Photo courtesy Stoneside Blinds & Shades

“For the summer, consider clean, modern cellular shades that not only look great in any space, but also offer amazing interior climate control while helping to reduce energy costs. For this time of year, I’m loving crisp white and seaglass shade colors.” —James Brewer, design consultant with Stoneside Blinds & Shades

Original article can be found HERE

A quick quip about appraisals and why they are so important to the home buying process

The appraiser is the person who evaluates your property to determine its value. If you want a higher appraisal, you’re going to need some expert help. Here are five strategies that will increase your success rate when it comes time for an appraisal review:

  • Audit your house’s interior to see what needs improvement and make it something that an appraiser would notice. This will also help you save money on future upgrades by knowing which repairs need doing first.
  • Get quotes from professionals for any work needed, as well as the costs of a contractor for having them do it – rearrange your furniture if it looks cluttered or messy. An appraiser will want to see how much room is in the house, and can’t do that when everything’s piled up on top of each other.
  • Clean thoroughly before an appraisal review, paying special attention to surfaces like counters and appliances where grease might be built up.
  • Have a professional clean your carpets so the appraiser can see what they really look like. An appraised home value will be lower if the house seems worn.
  • Make sure all of your appliances are in good working order, as an appraisers will want to know how well maintained it is.
  • Your realtor, or the listing agent, should attend the appraisal and come with comps that support the sale price, the listing and the sales contract.

If your appraisal comes in low, you will have to negotiate the sale price, get a different lender, or come up with the difference, or risk losing the house.

Your realtor should be able to explain any of this with you but if you’re still confused, please reach out, we are here to help.

Market Update – July 1st 2021

7/1/21 market update      

Hello everyone!

The Ann Arbor Area Board of Realtors now has some very nifty new analysis tools, so you can run market trends easily on your own. That said, I am going to continue my monthly data analysis and provide it to you, as I believe it is important to stay informed.

Inventory is still low, but it is increasing in many areas, including Dexter, Chelsea, Ypsilanti, Saline and Ann Arbor. Where it continues to be tighter than ever before is within the Lincoln school district. My guess is that there are affordable options of newer houses in good condition, which are premiums in this market.  

The number of contracts compared to offered listings is dropping slightly but still very much in a seller’s market. The areas where this has dropped includes all but Lincoln again. Ann Arbor was at 51.40% for existing (not to be built or new construction) single unit houses on 7/1/20 and is now at 59.02%. It reached a zenith on 5/3/21 at 72.63% of the houses on the market under contract. Ypsilanti, while still smoking hot, is lower than the same time last year, which noted 73.61% of properties under contract on 7/1/20, versus 70.91% today. 

So, this shows we have a bit of respite for inventory, but where? It is squarely in the $500,000 plus range if observing the entire Washtenaw County one-unit house inventory (not new construction).

What the data above shows is that overall, we still have less than one months’ worth of inventory in Washtenaw County, and if segmented purely by price range, increases as price increases. Over $500,000 we stop being in a sellers’ market based on contract to listing ratios and inventory, meaning unless the house is special, it might sit longer than if it were a more moderate priced property, which of course, makes complete sense.

Content Courtesy of:

Valuing your most important asset – check qualifications at https://annarborappraisals.com

Rachel Massey, SRA, AI-RRS, ASA,  IFA 

Certified Residential Appraiser 1204000774

ERC – Retrospective Appraisal – Reviews