Maine Lakefront Real Estate – Will It “Appraise Out”?

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Maine Lakefront Real Estate – Will It “Appraise Out”?


Just when you think it can’t get much tougher for lakefront property sellers, or better for lakefront property buyers, it does just that. For the last few years lakefront sellers have had to put up with weak demand and too much competition because of the large amount of inventory on the market. Now sellers face a new challenge.
You might know that the purchase of most lakefront property in the last few years has been with financing. Interest rates were so low even some buyers with the cash would elect to finance.
During the boom times from 1998 through 2005 mortgage brokers were everywhere. The interest rates offered by mortgage brokers usually beat the rates offered by the local banks. Mortgage companies, like banks, offered conventional financing. But they also offered an array of creative financing plans that were attractive to lakefront homebuyers.
Like banks, as part of the approval process a financing institution would agree to lend money subject to the property “appraising out“. That means that one of the final steps in approving the loan would be to send out an appraiser to the property for an inspection. Loans could not have been sold into the secondary market to outfits like Fannie Mae without an appraisal.
I must tell you that during the boom period I never had a property not appraise out. If the sale price was $475,000, it would appraise for $475,000, or better. The financing institutions were eager to get the loans and the market was rising, so everything got financed.
Things are different now. In the last thirty days, two of my transactions did not appraise out. One appraisal came in $25,000 less than the under contract sales price. The other came in at $15,000 under. In both cases the sellers had to agree to lower the sales price in order to make the deal happen. A bitter pill to swallow, I would say. Here’s why.
Most sellers are selling their lakefront property for far less than they could have a few years ago. When a property goes under contract, it’s contingent on tests, or investigations as we call them in Maine. So, a seller in some cases has had to sell at a big discount, reduce the price again due to adjustments made after inspections, and now reduce the price yet again because the property doesn’t appraise out!
This situation, so painful for sellers, is so incredibly advantageous for buyers. No longer does a buyer have to be concerned about paying too much since the appraisers are going to make sure you don’t !
Here’s a a tip for our lakefront cash buyers. You don’t need to finance in order to make your transaction contingent on an appraisal. Just make sure when you write your offer that it’s contingent on an appraisal. The exclusive buyer agents here at Mr. Lakefront will be happy to assist you.
By the way, if you’d like to take a look at the current market, do so from the comfort of your home by using our Lakefront Locator. It’s as easy as point and click!

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