In Praise of the Appraisal

No other part of the home-buying process can alternately make you jump up and shout for joy, or make you slump down in your chair, utterly defeated. You appraise high, you jump. You appraise low, you slump. But of course it’s a little more complex than that….

Home values seem like a moving target.  There are multiple offers about half of the time I put a deal together on behalf of my buyers, so I’m constantly balancing getting my clients the home that they want, while making sure they don’t pay more than what it is worth.

What is an appraisal anyway?

The appraisal protects the interests of the lender by making sure the property is worth what they’re loaning you for it. The lender hires (and the buyer pays for) an independent, unbiased opinion of the value of the home, including the proximity to amenities as well as the overall condition of the property.  They will also provide a report on the overall market conditions, if the property is in a “declining market” or a healthier, more stable one.  The appraisal isn’t an inspection, but they certainly will report if they can see obvious problems such as a leaking roof or other issues that might affect the value of the property.

Doesn’t the listing agent do that when putting the home on the market?

It’s a little different. The listing agent prepares a Comparative Market Analysis (CMA) to compare your property to those that have sold close by.  It takes into account the location, age, condition and size.  It is not an exact science and is typically presented in a price range – low price, high price and median.  The appraisal is a more exact valuation, and therein lies the difference.

As a seller, how can I get a higher appraisal? 

  • Accompany the appraiser while touring your home: Contrary to what you may have heard, sellers are welcome at the appraisal, and if you’re the seller, you should be there!  No one knows your home better than you; you know what improvements were made, the condition of the home when you purchased it, and even what you spent on improvements.  Point these things out! You’d hate to have an appraiser not know about your new roof or replacement window. Be sure to point out location features such as views and cul-de-sac locations.  Let your agent know that you would like to be with the appraiser, especially if you have done renovations in the home or have unique features that might need more explanation.
  • Provide the appraiser with comparable solds: Make sure that your agent provides the appraiser with appropriate comparable sold properties.  Be aware that you can use a home that is under contract, but not yet closed, as a comparable.  You can also search non-MLS sources for comparable properties, such as public records, for sold-by-owner properties and even new construction (Redfin.com lists all of these).  Ideally they cannot be more than than 6 months old, with three months being ideal.
  • Provide a list of upgrades to the appraiser: If you’re not going to be there to point them out, it is perfectly acceptable to provide the appraiser with a list of features or upgrades in the home.  In fact, it is helpful when the appraiser goes back to his office to prepare the paperwork.  Be sure to include items that might not appear in the appraisers photograph such as central air, the efficient HVAC system as well as the obvious solid surface countertops and the finished basement.  I have often looked at appraisals in which the appraiser forgot a bathroom or included a fireplace when there wasn’t one.
  • Correct public records errors: Be sure to check public records for accuracy and provide corrections to the appraiser.  If public records indicate that 50% of the basement is finished and you really have 80%, be sure to point that out.  Provide any documentation supporting square footage, including previous appraisals or architectural prints.

What if my home appraisers for less than what I agreed upon with the buyer?

First, take a deep breath. All is not lost. You have the right to appeal the appraisal.  The appeal or rebuttal process will be in writing (the HVCC prevents you or your agent from visiting the appraiser) and handled by the management group that the appraiser belongs to.  You will work with the agent to put together a written plan.  Be sure to use fact and figures. Be tactful and be logical.  Stay away from emotions or descriptors that don’t provide value such as “open floorplan” or “light and bright.”  You can use alternative comparables, or correct gross errors such as square footage.

I recently helped sellers who “fixed and flipped” a home in Aurora.  They bought it as a foreclosure and remodeled the home from top to bottom.   The seller is an architect and a general contractor; the work was top notch.  We got multiple offers on the property, at full price.  The appraiser called me to get access to the home and mentioned “I’m not sure how you came up with this price, I’m looking at the solds and I’m not seeing it”.  I quickly arranged for the seller to accompany the appraiser; he knew every detail inside and out what he done to the property.  I gathered up solds and even called some other agents with listings in the area that were under contract.    I forwarded those onto the appraiser, along with a note about the pending transactions and my multiple offers, on Christmas Eve, after just 15 days on the market.  We got our appraisal, the highest PPSF in the neighborhood for the past year.

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