And why do we get appraisals?

After being away from real estate for many months, I've had an opportunity to come up with comics about the industry. I have even gone so far as to buy a book written by the comic guru himself, Bob Mankoff of the New Yorker. I'm learning to draw. I will publish these comics. I may begin on this site.

But what I learned about real estate during the five years I worked for myself and over the last few months while purchasing a home in Colorado I'd like to share with the buying and selling public.

The old days of pulse = loan is over. Loans are first dictated by your crazy little number -- credit score. Second by down payment, where more is not always better. And third by the appraiser. When I bought my first house it appraised $18,000 less than purchase price. Because I had the worst real estate agent in the country, I paid the $18,000 "extra". Well, we did as I co-owned that house. I figured the karma gods would come around -- they did! My house in Colorado appraised for $5,000 more than agreed upon purchase price. And then, the appraisal was rejected.

I need to explain. I had more than 50% as a down payment. My loan amount was for a mere $37,500. At the monthly payment quoted by the lender I was left with 25 years of reserves (savings) in the bank. My appraisal was higher than purchase price. The lender rejected the appraisal stating the comps were inadequate and the house was unacceptable. The man I bought the house from lived in this "inadequate" home for years. My home inspector said this house was in great shape -- solid foundation, new plumbing and electrical. Since taking ownership of the house, I've had an electrician and two plumbers come to my house, both saying the house was in great shape. I'm dumbfounded.

I share this because in the five years I worked in the real estate industry and in the 25 years my Colorado real estate agent worked in the industry (and her husband is an appraiser), we've never heard of such a thing.

This reiterates more and more, don't spend the money until the cash is in the bank and the fat lady sings. A house is closed only after the money is received.