A low appraisal value can torpedo any home sale transaction. Both buyer and transferee have already agreed on a price and the buyer is busy choosing colors when suddenly the lenders’ appraised value comes in much lower than the sales price.
This scenario has played itself out countless of times in many home sale transactions but who really is to blame and what can you do about it?
The nations’ largest appraisal professional association, The Appraisal Institute of America, has taken the position that appraisers are doing the same research and analysis they always have been in order to arrive at a correct price. Appraisers don’t set the market but rather reflect what is going on. So what can you do to lessen the chances that a low appraisal will sink your sale? Here’s a quick guide.
- Provide the appraiser with your own comparable sales and listings. Your comps should include recently sold properties of similar size, condition and amenity levels in your immediate market area. Your real estate agent will help you gather this information prior to the appraiser’s arrival. Sara W. Stephens, president-elect of the Appraisal Institute says, “If you know there are comparable sales in the neighborhood where the price was affected by a divorce, financial distress or heavy seller concessions to the buyer, make sure you call the appraiser’s attention to these factors”. “Also, give the appraiser a list of all the value-enhancing upgrades and improvements you’ve made, including dates and costs.”
- If possible, make sure you are home when the appraiser arrives and plan to stay during his or her inspection of the house. Ask questions about his/her credentials. Where are you based? How long have you been in the business? What certifications and professional designations do you hold? Are you a member of the local multiple listing service (MLS)? If the appraiser doesn’t have the answers you are looking for you are more than likely going to receive a poor quality appraisal. You will want to alert the lender to your concerns as early as possible in the process. My experience has been that that once an appraiser has finished preparing their report they are less likely to take into consideration questions regarding competency or additional information.
- After the appraisal is completed, always ask for a copy to review; it’s your right under federal law. If the value comes in low, check everything in the report, from selection of comps to the accuracy of property measurements. If you find serious mistakes and the appraiser refuses to make corrections, appeal directly to the lender. Most have procedures to follow regarding “reconsideration of value.”
- Ask for a second valuation by a locally competent appraiser, even if that costs you more money.
- Finally, if the lender is not helpful and your contract falls out, consider filing a complaint with your state appraisal board. This may not help your current situation but may prevent another transferee seller from going thru the same painful process.
Source: Appraisal Institute of America