The appraisal can be a stressful process and may threaten to derail transactions. Twenty-one percent of REALTORS® say “appraisal issues” delayed their sales contracts in October, according to the most recent REALTORS® Confidence Index. Appraisal issues led to 13% of contracts being terminated. The appraiser evaluates the home’s lot size, condition (both inside and out), foundation, neighborhood, and any other amenities that add or decrease value.
Real estate professionals should prepare their sellers for the appraiser’s visit. Advise your clients to do a deep cleaning inside and outside the home, touch up paint, fix any minor maintenance issues, and have relevant paperwork—such as details about the home and comps—ready to hand over to the appraiser.
Appraisals can come in below a property’s sale price for several reasons. For example, buyers in competitive markets may have driven up a home's sale price in a bidding war, or an appraiser may find a property defect. Perhaps an addition to the house didn’t have a construction permit, which the appraiser would label as “cost to cure,” according to an article from HomeLight.
If an appraisal comes in low, the seller likely will have to negotiate with the buyer over the price again. Homeowners can challenge a low appraisal, but success is likely limited, Bill Gassett, a real estate pro with RE/MAX Executive Realty in Hopkinton, Mass., writes for RISMedia. Homeowners will have to prove a mistake was made during the appraisal, such as incorrectly recorded square footage. The seller could request another appraisal, but that isn’t a guarantee of a higher price.
Source: “What Appraisers Look for During a Real Estate Appraisal,” RISMedia’s HouseCall (Dec. 8, 2020) and “Here’s What to Expect From a Home Appraisal So You Don’t Blow It,” HomeLight (July 23, 2020)
