A Cautionary Tale About Not Verifying Home SizeMar 03, 2021
The year was 2014. Sam and April were a young couple with 2 small children. Sam had just gotten a job promotion and the family was relocating from Dallas to San Antonio. Their 3 bedroom, 2 bath, 2,375 square foot home in Dallas was under contract, out of the option period and 14 days from closing. The listing agent told them that all they were waiting for was the appraisal. Sam and April were very thankful the home was selling so quickly.
After their Dallas house was out of the option period Sam and April made a trip to San Antonio to find a place to live. They had found their dream home and had it under contract in 2 days. Everything with the move seemed to be running smoothly which was making the process less stressful. The couple grew up in Dallas so leaving Dallas and family was going to be difficult. The fact Sam and April had found the perfect home in San Antonio was going to make this emotional move a bit easier.
April let the appraiser in the day of the appraisal site visit. April did not know anything about appraisals except that the buyers needed a market value number for the home. The appraiser explained that he would be measuring the perimeter of the house and then he needed inside the home to take pictures of each of the rooms. After about 30 minutes the appraiser left.
One week before closing Sam got a phone call from their agent. She said there was a problem with the sale. She had just received a call from the buyers’ agent explaining that the house did not appraise for the contracted sales price and therefore, the buyers’ loan was not approved. Sam really did not understand. How could the house not appraise for the contracted price?
The listing agent met with Sam and April that evening to explain. The listing price was based on 2,375 square feet, which the listing agent had gotten from the county records. The appraiser measured the home and determined it was only 2,110 square feet. The 265 square feet difference made the home’s value less than the contracted price so the lender did not approve the loan and the deal fell through.
How could this situation have been avoided? There is a simple solution. The listing agent should have had a pre-listing measurement done on the home. List price is based on home size. Public records are not always correct because the information in the public records comes from voluntary sources and is not verified. Real estate agents take a risk each time they do not have the size of the home verified before listing because the appraiser will verify the size of the home for the lender and buyer.
What happened to Sam and April? They had to withdraw their contract on their dream home in San Antonio and lost the escrow money they had put down. The house in Dallas was obviously overpriced so they relisted it with a new agent at a lower price based on accurate square footage. Sam and April made it to San Antonio but the move had become much more complicated!
So remember to "think like an appraiser" and #measureBEFORElisting
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