Tips for Painless Appraisals
Although much of what needs to be done before the closing is the responsibility of others—appraisers, loan processors, and inspectors—remaining involved helps ensure that others do their jobs promptly and correctly and that the closing isn’t jeopardized.Tips for Painless Appraisals
Appraisers compare the features and condition of a home to similar properties to arrive at a dollar figure for its value. Getting the transaction closed will be easier if you make the appraiser’s job easier.
- Ask the lender to consider using an appraisal done by the sellers just prior to the sale.
- Give the appraiser copies of the comparables you located when you were pricing the property.
- Sharing your comparables is particularly important if the home has unusual features. Appraisers seldom take the time to dig for true comparables, which may result in a low appraisal if a home isn’t typical for the area. ~Danielle Kennedy, International Speakers Bureau, Dallas
- If possible, tour the home with the appraiser to ensure an accurate picture of the property.
- Review the appraisal report carefully for errors or omissions, such as listing two bathrooms instead of three, that might affect value.
Keep It Ethical
Avoid exaggeration or concealment of pertinent facts relating to the property. Limit your comments on the appraisal if it is outside the scope of your competency. Article 1, Article 2 , and Article 11.
5 Common Flaws in Residential Appraisals
1. Unclear neighborhood boundaries. Use specific street names, subdivision names, or price/age ranges to define the parameters of the neighborhood.
2. Omitted or incorrect site dimensions. Be sure that an appropriate plat is attached.
3. Insufficient allowances for improvements. Take updating and remodeling into account, especially in older properties.
4. Incorrect or inaccurate calculations of gross livable area. Be sure an accurate floor plan is attached.
5. Over- or underestimate of construction quality. Consider the quality of materials; they have a major impact on estimating replacement costs.
Adapted from “Back to the Basics: Typical Problems Encountered on Residential Appraisal Reviews," Dane Sever, Appraisal Review, October 1993
5 Strategies If the Appraisal Is Too Low
If the appraisal is too low, the buyers may not be able to borrow enough to close the deal. If this problem arises, consider taking the following steps:
1. Check the appraisal for mistakes. David Rathgeber, Century 21 Laughlin in McLean, Va., recalls a situation where a property was on the border of two different jurisdictions and the appraiser pulled comps from the wrong MLS. When Rathgeber asked him to take a second look—with correct comps—the problem was solved.
2. Have the buyers make up the difference with a larger downpayment.
3. Have the sellers make up the difference by taking back a purchase money mortgage from the buyers.
4. Renegotiate the price.
5. Talk to the lender if you have a legitimate case. For instance, maybe the property has a desirable feature the appraiser didn’t take into account. Or the appraiser failed to look at other comparable properties that sold at higher prices.
Reprinted from REALTOR® Magazine Online, http://www.realtor.org/realtormag, August 2009 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2009. All rights reserved.