Appraisals: What Sellers Need To Know
If a buyer is using financing to purchase your home, then the buyer's lender will order an appraisal of the property. Appraisals are not a guarantee of value, they are an opinion of value completed by a 3rd party. However, their opinion is what matters most to a buyer’s lender. An appraisal can make or break the deal. The buyer’s lender will only lend based on the appraised value. Unless the buyer can cover the difference in cash, then you will have to decide between lowering the sales price or looking for a new buyer.
At our Pricing and Strategy Meeting, we took a look at what homes sold for recently in the neighborhood as well as those that were currently on the market. We also considered in what price ranges buyers were looking for homes near your house. With this information you determined the best list price for your property. Sometimes this process is an easy one with comparable homes that set a pretty specific price range for your home, and other times that range can be large.
We went through this process with buyers, as well as appraisers, in mind. As we discussed, the appraiser will complete the same process when evaluating the home. Appraisers are trying to find the information that supports the sales price and the method used by many appraisers to establish market value is to compare similar homes in similar condition that have recently sold.
The appraiser will review the information and also complete a tour of your home. They often verify items such as square footage, bedroom count and upgrades. The appraiser then completes an appraisal report that typically includes at least 3 sold comparable homes along with any adjustments for items such as pools, 3 car garages, upgrades, etc. Homes currently on the market or under contract are also considered to see where the market is trending.
It’s important to note that appraisals are somewhat subjective. There’s a saying in real estate that you if you ask 3 appraisers for an opinion of value, you’ll most likely get 3 different opinions. And this is in part due to some of the challenges that appraisers face. For example, if there are not a lot of photos or information available on the MLS, the appraiser could use a home that needs repairs as a comparable home to a more updated home unless they do the research and not make the proper adjustments. Or an appraiser may not be familiar with the area and pull comparable homes from a neighborhood that is not comparable to yours.
What can you do to help? Your main job is to make sure your house is still looking its best, after all, this could be the MOST important showing that you have! It’s best if you are not at the property and give the appraiser the time to complete the report.
Once the appraisal is received, if the value comes in below the sales price, it can be very hard to get the value changed. My main job is to be proactive and try to combat some of the possible challenges that appraisers face upfront. First, I make sure that the appraiser is familiar with the area. If an appraiser has not completed an appraisal in the neighborhood in the past 2 or 3 years, we can request a new appraiser.
Before the appraiser goes out to your property provide the appraiser with the following:
- Copy of purchase contract and any counter offers
- List of all property upgrades
- Comps from past 3 to 6 months
- Good comps: a comp that, once adjusted, lands at or above sales price
- Bad comps: explain why this is a bad comp and should not be used, such as poor condition, an inferior lot, bank-owned, lack of upgrades, etc.
It typically takes an appraiser 48 to 72 hours to submit the appraisal report to the buyer's lender. Once I have received a copy of the appraisal we can go over the findings and what your next steps will be.
If you have any questions feel free to contact me at 623-252-9350 or firstname.lastname@example.org.