As a mortgage broker, I have helped clients
finance many types of real estate deals - small first-
time
homes, luxury vacation homes, condos and multi-
families. Many have been successful, while some
have been less so. When real estate sales were
particularly robust and housing values very high,
some people ventured to sell their houses on their
own (known as a For Sale by Owner or FSBO,
pronounced "fizbo").
While people realize that FSBOs come with risks -
a
potential longer time on the market, a lower selling
price, working with unreasonable buyers - they may
not anticipate other potential complications. One client
of mine recently experienced something unexpected,
but not surprising - an appraiser who valued the
home he was selling too low. With the permission
and encouragement of this client, I decided to share
his family's story with you so that you will understand
the pitfalls of doing something such as a real estate
sale without the best professionals.
Married Dad and Business Owner Takes His
Chances
Giuseppe Taibi is the married father of two daughters
and the owner of an olive oil import
business . He and his wife owned a
condo in a desirable section of Cambridge, on a
street that Boston Magazine once named the
best
street on which to live in Cambridge. This fact,
Giuseppe
assumed, would make it easy to sell. Other members
of his condo association also encouraged him to sell
the house as a FSBO, suggesting that other members
may know potential buyers.
Giuseppe was happy to find buyers quickly. After an
inspection and some negotiations on price, both
parties were fairly happy with the situation and signed
a Purchase and Sale agreement.
Everything seemed to be going well until the
entrance of the real estate appraiser. Giuseppe could
tell right away that the appraiser was not very
professional. His knowledge seemed shallow and
sure enough, the appraisal came in well under the
agreed upon price, so the bank would not loan the
buyers the money.
Appraising is about more than
square footage and number of bathrooms, and that
fact can be difficult to convince a bank. How does an
appraiser account for a sunny unit, desirable section
of a street, or any other feature that does not fit into an
appraiser's equation?
Appraisers today are very powerful, and banks are
being conservative. That combination can torpedo
even the smoothest real estate transaction. I was
working with Giuseppe on the purchase of a single-
family home, and he showed my independent
appraiser the appraisal on his condo. The
independent appraiser agreed to also appraise the
condo, and the price came in higher. Both parties
agreed to the higher price, since it was obviously
more accurate.
He and the buyers ended up splitting the difference of
what would have been a real estate agent's
commission fees. Giuseppe was happy that
everything worked out in the end, but he suffered a lot
of unnecessary stress. He emphasizes the
importance of working with professionals - real estate
agents and mortgage brokers. While clients often
think that they know what those professionals are
doing, there is a lot of work behind the scenes (such
as finding the right appraiser) that is vitally important
to a good sale.
