One of the worst feelings a seller (and agent) can experience during a real estate transaction is the gut-punch delivered by a low appraisal. I have worked through this situation both as a realtor and homeowner, and I can attest that neither “side” has the easier task to get back on track after this setback.
As an agent, I can think of two or three separate occasions in which the appraisal from the buyer’s lender came back lower than the purchase price. I can assure you that your ERA First Advantage agent will do everything in his or her power to prevent lowering the price and losing a lot of money as a result of the appraisal. And of course, we never want the sale to fall through and potentially lose a sale or new home for our clients. Often, we can try to make some strategic fixes and adjustments. As a result, in some transactions, we can manage to bridge the gap between the appraisal value and purchase price. It's always worth a try.
Personally, your resident blogger experienced a low appraisal as the homeowner, or at least as a very involved and interested party. Shortly before my husband and I got married and bought our home in Evansville, he had to sell his house in another town. He had lived there for about two years. He had gotten a great deal when he purchased the home, and made some nice updates while he was there. When the appraisal value came back at about $20K less than the buyers’ purchase price, we were stunned. That’s a truly significant difference! We were planning to use the money from the sale for a down payment on a home in Evansville. Imagine our fear of losing twenty thousand dollars in our budget. It was quite troubling and stressful.
We were much younger and less savvy at that point, so I deeply appreciated the advice the listing agent provided for us. In this post, I’d like to share a few ways you can help “right the wrong” of a low appraisal. As an agent, I, nor any ERA First colleague, can make no guarantees, as we are not the professional appraiser assessing the home. That said, these are some steps homeowners and agents can take to potentially get that value increased. It’s a discouraging situation, but doing as much as possible to fight back is well worth the time and effort.
Request a copy of the appraisal report. If you have the report in-hand, you can see exactly what criteria was checked to determine the value of the home. The report should also provide the comparable homes the appraiser referenced as well. Be sure to double check all the measurements for square feet and the numbers of bedrooms and bathrooms to ensure accuracy. If you see anything that doesn’t look right in the report, tell your agent and the lender immediately.
Go over the comps with a fine-tooth comb. Appraisers use comparable homes as a significant factor in determining your home’s value. Look carefully at the size, age, condition, location, lot size, and amenities for your home and the comps. Also look at when each home sold because market values tend to fluctuate even over just six months. This is really the best tool you have to use as proof that your home is worth more. What does your property have that others don’t? Why is it worth more in this sale?
Compile data on improvements and updates. This is something my husband and I did for his home when we dealt with the low appraisal. What updates have you made to the home that have increased its value? List everything, even small updates like improvements to the landscaping. It all matters in this situation. It’s even more helpful if you can provide receipts or invoices for work that was done to prove cost added into appreciation of the home. Be thorough and as detailed as possible in this task.
Get a second opinion. My recommendation is to have your realtor tackle this step, especially if he or she is gutsy and tactful enough to make the appraiser question some of the conclusions in the report. It’s a bit risky but can be tremendously effective if approached professionally and back-up data to support higher value.
Whatever you decide to do, fight for your home’s value and the work and care you’ve put into it. Do not settle for a low appraisal, whether you’re refinancing or selling. Oh, and in case you were wondering how that personal situation I mentioned was resolved… that list and a second opinion worked! We provided a typed, detailed rundown of everything he had done to improve the home throughout his two years as owner. Fortunately, the Realtor worked well with the buyer’s agent and they worked together to take the case to the lender. The outcome was an appraisal value of just $1,000 less than the purchase price. We were, of course, willing to negotiate with those terms.
While you must be objective and understand why the appraiser is adjusting value a certain way, remember that you still have some power as a homeowner and can challenge a report you deem inaccurate. It’s worth every penny!
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