You’ll meet a lot of people when you go through the home selling process. There’s the real estate agent that will work alongside you, the escrow agent who will handle the paperwork, the many potential buyers viewing the home, and the buyer who finally completes the transaction.
But there’s one person you may never meet, and if you do, your encounter will be brief and seemingly insignificant: the appraiser. Although your time with this individual may not seem like much, they have significant power over the sale of your home. To prepare for this powerful entity, here are eight things you might not have known about your home’s appraiser.
The real estate appraisal will dictate the value and price of your home.
Basically, an appraiser will inspect a home and determine its value. They have experience in the housing market and know exactly what to look for when defining value.
Once an appraiser has stated his/her assessment of the asking price, they’ll write a report that explains their reasoning. It’s considered a professional and credible valuation of any home, and thus, dictates the asking price you’ll set.
For the most part, you can trust the final appraisal. Your appraiser is required to be licensed and/or certified in your area and must fill out a report detailing certain elements of the home. For that reason, most home buyers and their financial institutions will take the word of an appraiser as law.
Home buyers can’t get financing to purchase a home without an appraisal.
The appraisal is a key document in the home lending process. The appraisal system is kind of like a fail safe so that homeowners can’t inflate prices for unsuspecting buyers. The banks must keep tight control over their finances, and they don’t want to put up money for something that’s not valued correctly.
You don’t pay for the appraisal, but you can do your own appraisal if you prefer.
Usually, the lender orders the appraisal on behalf of the buyer. It’s a cost attached to the buyer’s end of things, not your own.
However, there’s nothing stopping you from ordering your own appraisal. Sellers may choose to do this if they want to be more involved in the appraisal process. They could also order an appraisal if they feel the lender’s appraisal had errors.
This is an unnecessary step in most cases and will set you back several hundred dollars. If it brings you peace of mind, however, it may be worth the cost.
Home appraisals are different than home inspections.
There’s a lot of vocabulary floating around when you’re selling a home, and it’s easy to get confused. It’s very important to understand, however, that home appraisals and home inspections are two very different things.
The inspector and appraiser will both walk around the house examining things, but they’re after different criteria. An appraiser looks at the home in terms of money or value, and the inspector points out defects or potential issues that could cost a home buyer big in the long run.
At the heart of the matter, the appraiser is used to determine a viable asking price for the bank, while a buyer uses an inspector to gain leverage in the negotiation processes. You’ll have two visitors who want to look around the house on behalf of the buyer, so it’s important to distinguish the differences between them.
The appraiser looks for key characteristics when determining the value of the home.
The typical appraiser will use a document called the Federal National Mortgage Association (FNMA) Uniform Residential Appraisal Report when surveying single-family homes. (FNMA is often nicknamed “Fannie Mae,” so if a bank or realtor mentions that name, you’ll know what they’re talking about.)
This document will ask for a description of both the interior and the exterior of the home.
According to Investopedia, “the home’s amenities, number of bedrooms and bathrooms, floor plan functionality and square footage are also key factors in assessing the home’s value. The appraiser must do a complete visual inspection of the interior and exterior and note any conditions that adversely affect the property’s value, such as needed repairs.”
There will also be a street map, an exterior building sketch, details on square footage calculations, photographs of the home’s front, exterior photos of homes used in the comparison process, and similar information. There will be data from market sales, public land records, tax records, and more information that went into determining the property’s fair market value.
As you can imagine, it’s an extensive process. It usually takes between one and two weeks to gather the information and make a value statement.
You have some power to improve the appraisal process and value of your home.
If you’re worried about getting a poor valuation from the appraiser, take matters into your own hands. Look online for a list of criteria the appraiser might use when determining value.
“The appraiser reaches a value through three methods,” says Glenn Setzer in a comprehensive article from Mortgage News Daily. The first, and most important for you in raising your home’s value, is the cost approach.
“The cost approach is a best estimate of what it would take to replace the existing structure at current market rates,” Setzer continues. “Appraisers first assign a value to the lot or site on which the home is situated.”
If you want to raise the final value, you need to make sure the home is in great condition. Make repairs to areas you know are damaged. Inspect other key areas like plumbing, siding, electrical, and the foundation for signs of degradation. The better condition your property is in for the appraiser, the better your valuation will be.`
Though you can make improvements, remember that you can’t change the market. “The second and more important method used by appraisers is the comparison analysis,” says Setzer. This is done by comparing your home to the neighborhood and determining a value based on their market valuations. There’s nothing you can do to change the economy in this case.
The appraisal is fallible.
Sometimes the appraisal will come back with a valuation much lower than you projected. In some cases, it could be that you priced your property inaccurately. In some rare cases, however, it could be an inaccurate appraisal.
Though you can usually trust the appraisal to give an accurate depiction of your home’s value, it’s not perfect. There may be inaccuracies that you can call into question after the report has been made.
The appraiser may not be very familiar with the area, for example. Therefore, they might give a less accurate depiction of market valuations. There’s also the chance that he/she missed upgrades or repairs previously performed on the house. These factors can result in a lower valuation.
You should always ask for a copy of the final appraisal report and read it carefully. The lender, who typically orders the report, is the owner, but they’re obligated to show you a copy. If you peruse this copy, you may find discrepancies that can yield a higher valuation.
Contact Green Residential for Home Sales Assistance
Green Residential is a certified realty company in the Houston/Katy area. We offer a unique, flat-rate fee for our realtor services rather than a percentage of your home’s sale, which usually results in significant savings. We also understand the appraisal process thoroughly and can offer you guidance and advice in the sales process. For questions about the home selling process or our services, contact us today!