By Jeanette Joy Fisher
Appraisal vs. Market Value
When you sell a home, appraisers use comparable market sales of local properties sold within the last six months to value your home. Appraised value does not always equal the true market value, or what the home will sell for on the open market.
Realtors will give you a comparative market analysis, an informal estimate of market value based on comparable sales. Lenders, on the other hand, will use the appraised value to determine a new mortgage amount. Some lenders require that the stated property value covers the mortgage amount plus their selling costs in case of foreclosure. For this reason, a sale may fall through if a home sells on the open market for more than the appraised value.
Because a low appraisal can kill your sale, finding a buyer with a large down payment provides you with a safety net. You may also choose a buyer with strong credit who doesn't have to put a large percentage down. If you think that your home's appraisal could become a problem, make sure you don't include a clause in your sale's contract which states "subject to appraisal."
How to Avoid Low Appraisals
Hire your own appraiser before the sale. Then ask your buyer's or their lender's appraiser to review your appraisal.
Retain the option to approve your buyer's mortgage lender. Make sure that the buyer doesn't use a lender with a history of deliberately underestimating property values. A good real estate agent should know which lenders routinely under-value homes.
Keep records of repairs and upgrades, including costs. Take "before" and "after" photographs. Create an organized journal with a listing of expenses and include pictures to show to the appraiser during the appraisal appointment. Stage your home for the appraiser like you do for buyers.
Secure your own property comparables to make sure the appraiser uses complete information. Call real estate agents with homes in escrow and get the sales prices. Make a list of these properties with the agents' phone numbers and give it to the appraiser.
What to Do When Your Selling Appraisal Comes in Too Low:
- Ask for another appraisal.
- Protest the appraisal with documentation of your upgraded expenses.
- Have the buyers make a larger down payment.
When you sell or buy real estate, remember that the certified appraisal is just one person's opinion of the value of your property. The opinion that counts for you is the buyer's: you want to be sure the buyer values your home above all others.
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Copyright © 2006 Jeanette J. Fisher