When selling your home, you want to make sure your home appraisal is high enough to justify the price of the contract with the buyer. And if you are refinancing, the higher your appraisal is, the better. If the numbers don’t match up with your expectations, here are five things to check to make sure your appraisal is where it should be.
1. Check the Appraiser’s Report – You can request a copy of the appraiser’s report to review – especially if the appraiser did not actually tour the inside of the home. If the appraiser did not come inside, they may have missed key upgrades that would increase the appraised value. While some upgrades require permits, many do not and that is why making sure the appraiser has toured the home is important. On the flip side, even if you have some really great upgrades, if your upgrades have exceeded the maximum market value of your neighborhood, you may not be able to capitalize on them.
2. Check the Comps – Part of the appraisal process is to review the selling prices of other homes in your neighborhood that are as similar as possible to your home in terms of size, upgrades, type of home and lot size – these are called comps or comparisons. If very few recent sales have happened in your neighborhood, the appraiser may have had to look outside your neighborhood to find data for comps. Ideally, in these cases, the appraiser should seek out a neighborhood of similar value and with similar features to yours like proximity to top rated schools and easy access to public transportation. If the appraiser used comps from another neighborhood, it’s possible that the market value of that neighborhood doesn’t match up with the value of yours. Also, in cases of limited recent comps data, the appraiser may have used comps for homes that don’t match up closely enough with your home to be a good fit.
3. Check the Season – The real estate industry has a seasonal cycle in most areas of the country. During peak selling seasons like spring and summer, homes sell for higher prices than they do during the slower sales season of late fall/early winter. If the appraiser is using only data from other homes sold in your neighborhood in the preceding few months, and those months happen to be September through December, your appraisal can be lower than if the appraiser included comps from the most recent spring and summer months (in some areas, appraisers are limited in how far back they are allowed to look for comps).
4. Check the Appraiser’s Record – Your agent may have to assist with this, but in most cases, you can get some amount of data about the amount of experience and background of the appraiser. If the appraiser is new or inexperienced, they may not have had the appropriate knowledge of your neighborhood to provide a fair appraisal. Likewise, if the appraiser has a history of challenges filed on their appraisals, they could typically overlook details that other appraisers take into consideration.
5. Check into a Second Opinion – While it may cost you money out-of-pocket to do so, if you feel your appraisal is not where it should be, you can have a second independent appraisal done by a different appraiser. Neither the buyer nor the lender are required to abide by the second appraisal but if there is a significant difference in value between the two appraisals, the lender may re-evaluate decisions that were based entirely on the first appraisal.
The appraisal can make or break a pending sale or refinancing agreement. If the numbers don’t seem to add up, check out these five things to make sure your appraisal really is where it should be and communicate any concerns you find to your agent.