Dealing with a low real estate appraisal

When buying a home, mortgage lenders typically require a property to appraise at or above the purchase price in order to fund a home loan.  This is to ensure that the collateral, the property, is worth more than the loan amount in the event they need to foreclose on the property. 

With the recent changes to the market and the lending environment, low appraisals are unfortunately becoming more and more commonplace.  This article will focus on how to potentially increase an appraisal and what to do if you receive a low appraisal.

If you are selling, here are some things you can do to potentially increase the appraised value of your home. 

1.      Provide a detailed list of every improvement that you made to the property while you owned it.  Did you replace any appliances?  Did you update light fixtures or hardware?  Did you add or replace a deck?  Include the costs of any improvements.  When were the improvements made?  Do you have appropriate building permits and certificates of occupancy?  I would prepare this list in advance and in writing so that you are sure not to forget anything while the appraiser is at your home.   

2.      Make sure both the interior and exterior of the home is clean and clutter free.  The appraisal is based, in part, on the condition of the home compared with other properties in the neighborhood.  A clean and clutter free home is more likely to provide a favorable impression resulting in a higher appraisal amount.  Likewise, if you can, repair broken items or finish any incomplete projects before having the house appraised.   

3.      Make sure the appraiser has access to the entire property.  If you have outbuildings, make sure that they can get into the outbuildings.   

4.      Gather a list of comparable home sales in your area.  What are similar homes selling for?  If you are utilizing the services of a real estate agent, your agent can assist you with these efforts.   

5.      Have documents such a surveys and house plans available for the appraiser to review.  You want to be sure the appraiser has the appropriate lot size and square footage. 

So your appraisal comes in too low, now what? 

You and your real estate agent should review the appraisal to see if there are any errors.  Errors might include the wrong square footage, the wrong lot size, and omitting comparable homes.  Is the information for the comparable homes accurate?  Is the appraiser familiar with the area?  If errors are found, the appraiser may revise his or her report or your lender may be willing to allow a second appraisal.  Please note that it is rare that an appraisal is successfully challenged. 

The parties have several options in dealing with a low appraisal.  Frequently, contracts of sale provide that the deal may be canceled if the appraisal is too low.  Often sellers reduce the purchase price to the appraised value so that the lender will fund the loan and save the deal.  Another option is that the purchaser could make up the difference between the purchase price and the appraised value in cash.  This option is more likely when the appraisal is only a few thousand dollars lower than the purchase price.  The seller and buyer could also agree to meet in the middle.  The seller reduces the price and the buyer brings more cash to the table.  Lastly, the parties may cancel the sale if the contract allows. 

If you need assistance when buying or selling a home, be sure to obtain competent legal representation to guide you through the negotiation process.  This article is not intended to be legal advice and does not establish an attorney client relationship.  If you wish to speak with Ms. Cassidy on a specific legal matter, please contact her at 845-981-7223.

Landlord Self Help

It can be frustrating for a landlord when a tenant fails to pay rent on time.  A landlord may not be able to pay the mortgage, pay utilities or the property taxes.  When this occurs many landlords are tempted to turn off the utilities or lock the tenant out in an effort to force the tenant to move out.  These efforts are commonly refered to as "self help" and can lead to significant civil and criminal consequences.  The only person who can forcibly remove a tenant from a property is the Sherrif with a court ordered warrant of eviction.

New York Law provides for a summary proceeding that allows landlords to quickly evict tenants who fail to pay rent.  These proceedings take place in your local justice court.  After a successful eviction proceeding, the Judge will sign a warrant of eviction and a judgment for any rent that is owed.  Once you have a warrant of eviction, you can present it to the local Sherrif's office who will schedule an eviction. 

Although this process takes some time and some money to complete, it ensures that you have lawfully evicted a tenant.  In contrast, New York Law provides for criminal and civil penalities if a landlord unlawfully removes a tenant.  For example, the Real Property Actions and Proceedings Law provides that a tenant may be awarded treble (triple) damages.  Damages can quickly escalate to the point that they far exceed the rent owed and you end up owing the tenant money rather than the otherway around. 

If you need to evict a tenant for non-payment of rent, contact competent legal counsel to guide you through the process. 

This blog is not intended as legal advice and does not establish an attorney client relationship.  If you wish to speak with Elizabeth Cassidy on a specific legal matter, please contact her at 845-981-7223.

Make a list

When renting any space, make a list of any and all issues with the space before you take occupancy.  Are there existing stains in the carpet, holes in the wall, broken door knobs?  No matter how small an issue may be, write it down so that you have a record that you didn't cause the damage.  Better yet, take pictures.  Provide the list to your landlord and keep a list for you.  This way if there is any dispute at the end of the lease, you have evidence that you didn't cause the damage. 

It takes time

Many of my clients buying or selling a home ask: "How long is it going to take to close?"  The answer is always - longer than you would like it to.  The time it takes to close varies based on a number of factors.  These factors can include:

• How long it takes for contracts to be negotiated
• Does something come up that requires contracts to be renegotiated?  For example, the appraisal can come in too low for the lender to loan.
• The survey...is there bad weather
• The lender's time frame
• Acts of God - no I am serious.  When my husband and I bought our home, the County Government Center was closed due to Hurricane Irene and Tropical Storm Lee which prevented the title company from doing its title search.

Whether buying or selling, allow extra time for the closing.  It may take longer to happen, but as the saying goes, good things come to those who wait.

Have you paid your taxes?

Today's Times Herald Record contains a lenghty list of property owners who have failed to pay their real property taxes (see page 60).  By publishing this list, Orange County is taking its first steps toward foreclosing on your property.  It is essential that if you are on this list, you do not ignore it and respond by either redeeming your property taxes or filing an answer.  I also strongly advise that you consult with an attorney.  You must act to protect your rights.

This is not intended to be legal advice nor does it establish an attorney client relationship.  This may be considered attorney advertising. 

Get It in Writing

Scott Wohl of the Builder's Assocation of the Hudson Valley wrote a great article in today's Times Herald Record discussing the warning signs of unscrupulous building contractors and how to protect yourself.  (See link below) I think his most important piece of advice is to get a written contract.  This advice applies extends far beyond the construction industry and applies to any business relationships. 

It is important that the contract describe the scope of work, the cost, and provide a discussion of what happens should something go wrong.  The contract provides a rule book during the course of the business relationship and should things go awry, a judge can interpret that rule book in court. 

Here are some examples of why a contract is so important. 

My client Jane Doe comes to me with a simple contract that reads to the effect:

John Builder agrees to build a deck for $10,000 for Jane Doe at 123 Main Street.  20 percent down with the rest upon completion. 

This simplistic contract fails to address a number of critical items such as the quality of the deck, the materials to be used, and the size.  Is there a completion date?  Are there rules regarding where the workers should store there materials?  Is a building permit required?  Who is responsible for obtaining that building permit?  More importantly, this contract fails to identify what happens if something goes wrong or if one party fails to perform.  Who is entitled to what? 

Another common occurence is when a client comes into my office and hands me the simplistic contract described above and says to me, "Well John Builder told me that he would use composite decking but he used scrap lumber instead."  Because the term composite decking is not in the written contract or in a written contract modification (aka a change order), it becomes very difficult to enforce.   It becomes a he said vs. she said in court.  Had the contract specified composite decking as the required material, John Builder would be in breach of contract and the homeowner would have been entitled to some level of damages. 

Lastly, I have had a number of clients who did not get a contract when doing business with family friends because they trusted them.  If they are truly your friend, they will provide a detailed written contract so that the rights and obligations of both sides are clearly spelled out and expectations are clear.   

Guest Columnist: Warning signs you should try to keep in mind | recordonline.com

This is not intended to be legal advice or establish an attorney client relationship.  Should you have a legal matter that you wish to discuss with Elizabeth K. Cassidy, please contact her office at 845-981-7223

Welcome

This will be the first of what I hope are many posts about changes in the law, recent case decisions, and important local and state news.  As a lawyer, I must provide the obligatory disclaimer.  Information contained on this blog is not intended to be legal advice nor does it establish an attorney-client relationship.  Anything you post to this site open for the public to see and potentially use against you later on so please do not share your specific legal matters on this forum.  If you wish to discuss your legal matters privately with me, please do not hesitate to call my office at 845-981-7223 or send me an email at ecassidy@ekcassidylaw.com.