A new system when selling and buying a home

Realtors have been selling homes for 1000's of years now. Realtors and professionals have been using the system that has been put into place. The loan officer and the Realtor are paid by commission and the Appraiser is paid a set fee. The appraiser is usually one of the last professionals to determine if the transaction will work or not and therein lies the problem. Over the years, someone has concluded that this process is the best way to close a sale and make everyone happy. But I'm here to tell you that this system is completely stupid. Let me tell you why.

Here's an explanation of the problem of the real estate transaction.

First you get per-approved by your lender. This will assure that you are not wasting your Realtors time when they show you 49 houses and you tell them you don't have any money. Now your pretty sure that you can get x amount of dollars to buy a home. This process makes since for the Realtor and the home owner.

Next you pick a Realtor or the Realtor told you to get approved before they'd work with you. The Realtor is now ready to show you the homes of your dreams. They will look for homes within your price range. While this sounds good so far, this is the first flaw because the Realtor will not show you homes that are in the same market as the home that you are considering, because their goal is to sell you a home at the maximum dollar that you are approved for. So if there is a nicer home that cost less, most likely you will not see this home. I digress, let's move forward.

Finally, after months of looking for a home, you've finally found one. You make an offer based on what your realtor has told you.

Next, your bank hires an appraiser to look at the home and tells the bank what the value is. Now if the value of the home is within reason and supportive by the comparable sales, the loan will go through and the entire process works. But what happens when the value of the home you are buying is too low or too high. You see, this is the problem. Now the appraiser, just, doing their job, has now ruined everyone's life and has just made everyone mad that is involved in this transaction. Let me explain.

The Realtor has just spent the last three weeks helping you find a home and making offers, writing contracts and using their gas money and time to find you a home. The other Realtor has listed the home sellers home and spent days talking to the buyer’s agent to “make the deal work.” Now, since the value is not supportive, the entire deal is worthless and all of the Realtors time has been wasted and the Realtors will not get their commission checks for all of their hard work. But wait, it gets worse.

The loan officer is the one working with the home buyer. They've made sure that the borrower's credit is good enough to buy a home and worked through all of the reports and paperwork and picked out a bank to provide the loan. At last, the deal is about to close, but wait, the appraiser just went to the home and now he has finished the appraisal and is now blamed for “killing the deal.” Now the loan officer will not get a dime in commissions.

The buyer has finally found a home that they like and want to buy. They've been planning this move for months. They are beginning to pack and have given their notice or listed their home for sale because they are going to move into their new home first. But wait, the home value came in too low and now the buyer does not want to buy a home that they paid too much for and the seller doesn't want to sell a home for less than he agreed.

The owners' worked hard to sell their home and they've worked hard in making all of the improvements to increase the value of their home. Now the seller of the home thought for sure that everything was okay, at least that's what the Realtor told them. They've signed an agreement to rent an apartment and they started packing. But wait, the value of their home was too low and they are not about to sell their home if they have to take “that” much off of the price. So the entire deal falls apart.

Therein lies the problem.

Here is a better way for the buying and selling process to work.

At this point, if the buyer and seller agree on the price and the buyer is pre-approved, the loan will go through and there are no surprises and the entire deal will go through once it gets to this point.

The real advantage of this system would be that everyone in the transaction will not be writing contracts that may not close which places the buyers and sellers in a nightmare position of making other plans in anticipation that the sale will close. Secondly, the professionals involved in this transaction would not have to waste as much time and get their hopes up about closing a deal, only to have the deal fall apart at closing.

You see, the only difference is the timing of when the appraisal is ordered and one more appraisal to be sure that the deal is in the best interest of both parties. In the first example (the way it's always been done), the appraisal is completed at the very end of the transaction. In the second example, the appraisal is ordered before the negotiations start. This way the buyer and seller will find out what the home is worth. From this point, they can negotiate the price of the home. This will always insure that the value of the home is within reason. The two appraisals can be forwarded to the bank so that the bank can look at the appraisals and decide if they'd like to risk their money funding the project.

A second solution would be for the buyer of the home to order his own appraisal. Now most of the time, this will not happen, because the buyer thinks that they can get this information for the Realtor. But remember, the Realtor makes their money by commission and many Realtors are professional negotiators. So your Realtor is probably not the best person to advise about the value of the home you'll be buying.

You may be asking, why two appraisals? You see, as a full time appraiser I get many second appraisals for buyers, sellers and home owner. This is because they are not sure of the value for various reasons. So the bank gets two appraisals when values are difficult to determine. This will ensure that the home value does not get overlooked and having two opinions will allow the buyer and seller to come to an agreement.

Why not have the buyers order their own appraisal? If the buyer is allowed to order an appraisal via a third party and they will not communicate with the buyer, this may work, but the system would be better if two non-bias appraisals were ordered with each individual ordering their own appraisal from appraisers that are selected from a database that is unknown by the person ordering them. This will ensure that there are no favors for anyone in the transaction. This will result in two appraisals that are completely objective and honest.

A system like this would create happier buyers, sellers, realtors, appraisers and loan officers.Don't you think?