5 Appraisal Facts That Could Save You Big Money
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An appraisal is a professional’s opinion of your home’s market value. Lenders will order an appraisal for home purchase loans to make sure the home is worth the price being paid. Often appraisals are needed to refinance as well. Here are five things you should know about the appraisal process, whether you are buying, selling or refinancing.
The appraisal takes dozens of factors into account. Learn more about them in the video below.
1. Your Property is Not the Only Thing the Appraiser Will Look At
“When I inspect a home for an appraisal, the inspection is really the ‘tip of the iceberg’ of the work I do,” San Francisco Bay Area appraiser Ann O'Rourke writes on her web site, Appraisal Today. Before arriving at your home, the appraiser has probably already obtained a plat map and researched the zoning and public records. After checking your property against the map, and noting any improvements and damage, the appraiser will compare your home to others that recently sold to formulate an estimate of its value.
2. You Can Educate the Appraiser About Your Home
If an appraiser visits your home, this is your opportunity to show it at its best. Complete any small repairs before the appraisal date. Clean up the yard and house. Even though appraisers aren’t supposed to take clutter into account, they are human, and no one feels upbeat when faced with a mess. Besides, cleaning shows that you take good care of the home. While the appraiser looks, let them know about improvements you may have done (New furnace? Bathroom renovation?). You can also give him or her a written list and may even want to provide receipts to show what you have invested in the home.
3. A Low Appraisal Can Stop the Sale or Reopen Negotiations
If the seller has researched the market and set an appropriate price, the appraisal is likely to come in at close to the agreed-upon price. But sellers should beware that if the appraisal comes in low, the deal will probably not proceed as agreed. Since the buyer most likely won’t be able to get a mortgage for a house priced above appraisal, the deal may fall apart or the seller may have to agree to a lower price.
4. You Can Challenge a Low Appraisal
So the worst has happened and your appraisal came in below the selling price. All is not lost. You can request a copy of the appraisal and review it with your real estate agent. Pay special attention to the comparable homes the appraiser selected. If those homes sold for less because they lack updating or some other feature that your home has, you can have your agent submit a list of more appropriate homes for comparison. You can also write a letter listing improvements and features that the appraiser may have overlooked. The Bigger Pockets Blog has advice on how to keep the letter non-confrontational, and even offers a template for download.
5. As a Buyer, Guard Against Inflated Appraisals
Once you’ve agreed to pay a certain price, you naturally hope that the appraisal will back that up. But in reality, appraisers are protecting both the lender and the buyer against inflated prices. So it’s a good idea to ask the same questions about an appraiser that a seller would: Is she licensed and local? Did he really visit the home?
Request a copy of the appraisal, not only to check for accuracy, but as an information source to make sure you know all about your future property’s strengths and weaknesses.
