What Should I Expect During an Appraisal of My House?

Posted by Tim Ryan on Thursday, April 19th, 2012 at 9:36am.

Appraisal time is nail-biting time. House appraisals – a professional appraiser’s opinion of the value of a piece of real estate – can make or break a sale. No matter how much the seller thinks her home is worth and how much the buyer is willing to pay, it is the appraiser who determines its true value. And it’s the house appraisal that determines whether or not the bank will lend on it.

Most of the time, a savvy real estate agent gets really close to appraised value when she compiles her market analysis for the seller. Sometimes, however, the seller doesn’t take the agent’s advice and insists on listing the house for more. This is usually the problem when a house “doesn’t appraise,” meaning the appraiser’s valuation comes in lower than the sales price.

What Does a Home Appraiser Do?

A professional appraiser is an unbiased third party who is trained to determine the value of a piece of property. While not all appraisers are state-licensed, federally regulated lenders are required by law to use only those that are. Like many real estate agents, many appraisers belong to a national association that adheres to strict ethics.

Are house appraisals always accurate? Usually they are, but not always.

What Affects House Appraisals?

Numerous factors can influence a home's appraised value. Some of these include:

  • How the national and local economies are impacting the real estate market.
  • The location of the house.
  • Foreclosures in the general vicinity.
  • Problems with the house.
  • The value of other, similar homes that were recently sold in the area.
  • The appearance of the home compared to those that have recently sold.
  • Upgrades made to the home. If a new kitchen was recently installed or a second bathroom added, this can increase a home's value.

A Day in the Life of a House Appraisal

Let’s assume you’ve made a full-price offer on a house that is listed at $300,000. The lender will order an appraisal of the house before deciding to give you a loan for that amount.

The appraiser visits the home and looks at every aspect of its exterior, from the roof to the soil. Then, she inspects the interior, from the ceiling to the floors. Finally, most appraisers measure the square footage of both the house and the lot.

Back at her office, the appraiser uses the information she compiled to compare it against comparable sales nearby. She takes other facts into account as well, such as any problems with the house and any upgrades. She will also check local planning departments to ascertain if anything is planned in the nearby community that may impact the home’s value. Finally, the appraisal is compiled and handed off to the lender.

The best news a buyer can receive is that the house appraised for more than he offered. The next best news, for both buyer and seller, is that it appraised at the offered price.

Dealing With Low House Appraisals

A buyer has only three choices when an appraisal comes in under the agreed-upon sale price: Ask the seller to lower the price, increase the cash down payment or walk away from the deal.

Sellers have several choices as well. These include lowering the price of the house to meet the appraised value or challenging the appraisal.

If you feel the appraisal of your house was too low, look over the report carefully for discrepancies. Check that it accurately reflects the square footage, the age of your home and the number of bathrooms and bedrooms. Check the comps the appraiser used for errors in price, age or size. If you find errors, have your real estate agent contact the lender for a new house appraisal.

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