For most sellers, a home appraisal could be an important part of the home selling process. If the buyer plans to obtain financing from a lender, they will typically require the appraisal amount to be equal to or greater than the sale price. The results establish a home value relative to the neighborhood and the sale of comparable homes in the area. Knowing what to expect from the process can help sellers understand how the appraisal could affect the home sale.
How Do Appraisals Work?
Once the buyer and seller have agreed on the details of the purchase contract, the buyer's side (usually the lender) usually orders the appraisal. Although the appraiser might only visit the home for a short time, preparing the report can take up to a week or two. The appraiser's goal is to look at the structure and permanent fixtures of the home to ascertain its condition. They may also inspect the exterior, including the landscaping, as part of their research. The appraiser compares this information to recent sales of similar properties in the area. This provides an approximate current resale value for the home. Since location and the condition of the neighborhood heavily affect home values, these factors will come into play. At the end, the appraiser provides a report with their results.
Do All Appraisals Reach the Same Value?
Appraisers all have to meet the same local guidelines for training and the rigor of their research as they prepare the report. However, appraisers often come to different conclusions about the same property. Even if they are working from the same information, they may focus on unique sets of information. A lot of comparable sales in the area allows appraisers to select separate groupings that may return different answers.
Appraisals often base a lot of the home's value on its size and condition. The former is objective, but the latter is dependent on the professional. An appraiser who misses information about a recent new home improvement (e.g. a new roof that is covered with snow at the time of appraisal) might appraise the home in an older condition than is accurate. These independent factors usually mean that an appraisal from one professional will be higher or lower than another's.
What Happens if the Appraisal Comes in Low?
On occasion, the appraisal will come in lower than the purchase price. Buyers relying on mortgage financing usually put a contingency in the contract that may allow them to cancel or renegotiate the purchase if the appraisal comes in low. The contingency may permit them to retrieve their earnest money. If it is only a little less than the sale price, the buyer might decide to pay more in cash at closing to keep the process going. Sellers could also drop the price to accommodate it. Interested parties may be able to fight the appraised value, if the report shows that the appraiser left out important aspects of the home. Both buyers and sellers need to remember that the final decision rests with the party that ordered the appraisal, which is often the lender. It is up to them to determine if they would like to challenge the information on the report, or request a second opinion.
Should Sellers Obtain an Appraisal Before Listing a Home?
Most of the time, it may be unnecessary for sellers to get their own appraisal before putting up the home for sale. Real estate agents can usually estimate a fair market value from a comparative market analysis. In a neighborhood with at least a handful of recent sales of similar homes, it can be relatively straightforward for an agent to return a value that is likely to be close to the appraised value. Ordering an appraisal could just cost an extra few hundred dollars to provide a similar answer. Sellers may want to have an appraisal if the home is particularly unique or located in an area with no comparable properties that have recently sold.
How Can Sellers Ensure the Best Possible Appraisal?
Once the appraisal is under way, Bellacere home sellers can only sit back and wait. Prior to that, they should confirm that anything permanent on the property looks its best. Staging is not likely to feature much in the decision, but curb appeal does. For example, a home exterior in sore need of repair may cause the home to be rated in a worse condition, lowering its overall value. Making a list of recent improvements, especially extensions, developments or larger upgrades, helps the appraiser to have the most accurate information.
The appraisal could be the most stressful and important part of the home selling process, even though it is fairly indirect for sellers. Providing complete information and getting the home in ideal condition are the best ways sellers can ensure the highest possible value.
Debbie Drummond is a Full Time Realtor with over ten years experience in the Las Vegas Real Estate Market. She and her team of Real Estate Pros offer the highest level of service. If you’re buying or selling a Las Vegas home, call (702)354-6900 or email Debbie@LVHomePro.com. They’ll be happy to assist you in your move.