Appraisals are Actually 'Estimates' or 'Opinions' AND ARE ALWAYS REQUIRED BY LENDERS TO FIND THE LENDABLE VALUE OF THE PROPERTY.
If you truly understand the meaning, it puts a scary twist in the transaction….
First of all, let’s set the stage.
You are selling your home. You and your realtor are going through numbers to place a sale price on your home. Your realtor advises the perfect price for your home. While the seller listens to the realtor explain why the home should be priced at the perfect price, the seller has an epiphany, why can’t I go higher, say maybe $10,000 over. Hence a double sided sword issue. What time of year is it, how is the market, is your home upgraded far above the rest? How have the sales in your neighborhood been? How will the appraisal come in? Above all, the seller wants what the seller wants.
LIVE IN THE MLS
Finally the home goes live in MLS and the response is better than expected. The purchace contracts are start coming in, most being fair market or under list price. For that reason, you hold out. Hallelujah, the gambling buyer comes along. The buyers offer is at the list price. You accept the offer and escrow is opened. You progress through the sale. The day is here and the appraiser is knocking at your door. Your home is shining bright, shows like a million dollars. Certainly the appraiser will see the value. Ethics and standards guide the appraiser. The state licenses appraisers. Furthermore, they have had extensive training and education. The appraiser portal that lenders are required to use, ensure the appraisal is picked up by a neutral company. No room for shenanigans here. Maybe, I hope, this makes you feel easier about the appraisal process.
Remember, trained, ethics, standards and the home shows superbly.
An appraiser will come in, looks around, takes pictures, maybe test the appliances and hopefully measures the home for the true size. The appraisal report is done 3 days later ready for review by all parties involved in the transaction. It did not come in at the agreed sale price, no surprise there, as a matter of fact is came in $14,000 under. OMG. After you pick yourself off the floor, you are looking for answers. I, of course, would remind you of the value I had placed on the property and go from there.
The first thing is to read the report. Are the comps good? An appraiser has to use comps that are within last 6 months from recorded sale, within a mile, +/- 10 years in age, +/- 15% of the square footage and as close as similar features as possible. Everything looks good, except for the comp that is older than 6 months and is smaller than the allowable +/-15%. Oh yeah, it has a 3 car garage and yours is a 2 car garage.
As a result, you look to your realtor for help.
Consequently, the realtor’s first step is to comb through the MLS and public records for a replacement comp. Most of the time this is easier said than done. Specific value is placed on bedrooms, bathrooms, garages, square footage….etc. Furthermore, an experienced realtor has lived through many appraisals and has a basic idea of the value of each item. The seller conversation about the buyer paying the contract price happens. Your realtor will ask you a reality check question “would you overpay for the house?” you can take it from there.
Hurray for the Comps
After many hours of looking and calculating have passed, as it turns out, the old comp looks mighty fine. Furthermore, a foreclosed property comp should have never been used. Wait a minute, a sale that is within the time frame that can be used for the appraisal. Get the calculator out! Punch in the numbers add for this, minus for that……toss it around, almost sounds like a yummy salad…Finally, the “LET’S CHALLENGE THE APPRISAL!!!” is the answer. Surely anyone can see that this seems like a good idea. Yes, appraisals can be challenged as long as it is done within 3 days after receiving the report. The hope in this story is to bring in $4000.00, because the beginning overpriced sale price is a thing of the past. You have a 50/50 shot, so why not…………be prepared for “no” and revisit other money items that maybe can be renegotiated.
As a result, when problems arise, remember the goal that motivated you to sale your home is still there. For every problem there is a solution. At the end of the day, your “lesson learned” sets you up for purchasing of your new home a bit wiser.
Therefore, these are my final words of wisdom. As a seller, please listen your realtor’s advise when it’s time to price your home. Embrace the facts. Above all, in the end, you will have a smoother and less stressful transaction.
Thank you for reading!