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The appraisal

Dealing with a bad appraisal

Most appraisers are very competent and professional. Homes are usually appraised for the selling price and there’s no problem.

Appraisers compare your home against three similar homes that have sold in your neighborhood in the last six months, usually within 15% of the price of your home. The more similar they are to your home, in sales price, age, style, size, etc., the more likely they will be used as a comparison.

Your home could be appraised low for two reasons: first, because it simply isn’t worth the sales price or two, because unfortunately, it was a flawed appraisal.

Be proactive:

Aggressive methods to solve appraisal problems are very effective because both parties want to see the sale succeed. But they are typically not done since the appraisal opinion is simply accepted as gospel.
Your home’s selling price should be in the range of its actual value if you followed the recommendations from the PRICE section. If there were errors performed during the appraisal, there are steps you can take to eliminate this problem. 

Take action:

  • Find out what your home appraised for. If there is a problem and you’re selling by-owner, you’ll probably get a call from the buyers. Remain calm. Tell them that this happens all the time. Ask to take a look at the appraisal and let them know that there are always areas that the appraiser missed or was given incorrect information. Try to arrange to get a copy of it–ASAP.
  • If the buyers aren’t cooperative, ask them what their position would be if the appraisal matched the selling price. This will tell you that they still want to buy your home or if they have soured on the deal. If they still have interest, let the buyers know that the appraisal was done in error and that you’re working to solve this problem.
  • If you get a low appraisal, insist on a second opinion–always with a different appraiser. After all, you never ask for a second opinion from the same doctor. Do not disclose to the second appraiser that this is a second evaluation. Professionals don’t like knowing their work will be compared to a fellow practitioner.
  • If the buyers are unable to supply a copy of the appraisal, ask the appraiser or the lender for one. You may have to be insistent here since the lender will point out that you didn’t pay for it, the buyers did. If you’re not getting anywhere, ask to speak to a manager and explain your dilemma.
  • If you run up against roadblocks, get a list of the homes that were used to compare against the subject property (your home).
  • Find out what you can about the properties your home was compared to. The appraiser saw the inside of your home, but not the inside of the comparable homes. The appraisal could have been based on false or erroneous information on those homes. Information on the comparable houses is often taken from the MLS, which is filled with flowery hype and may contain inaccurate information.
  • Appraisers like to use local comps that sold in the last six months, but will bend this guideline if local turnover has been slow. They also might have to go out of the local vicinity for like comparisons if your home is hard to compare against, like finding a decent selection of older mansions, contemporaries, log houses, etc.
  • Being a current home seller, you should be aware of recent sales activity in your neighborhood, both listed and by-owner. For sale by owner homes don’t appear in the MLS and appraisers usually don’t bother using them for comps.
  • See if any homes were not used as comps that are similar to yours and sold during the past year. Don’t be concerned about using homes that sold for less than your selling price (but are within 15% of your contract price). Adjustments are applied for differences in order to establish a similarity in comparison. Differences are found in square footage, lot size, number of bedrooms, fireplaces, basements, etc.
  • In addition, appraisers may have missed using a good local comparison home because it recently sold and the sales details had not been recorded when the appraisal was performed. In many counties, updating of tax records are often backlogged for weeks. MLS records are not always current and an occasional sale can slip through unrecorded.

If your home didn’t appraise to the selling price, look for every opportunity for a comparison sale that will make your case.                                 

Other considerations:

There are properties you don’t want yours to be compared against. The appraiser could have used one as a comparison to your home.

Houses used for comparison could have sold under market value because the owners were in a must-sell situation. For instance, in an estate sale, the heirs may decide to quickly accept a low offer, since there isn’t the usual incentive to maximize the profit that will be divided. Or, if the buyers and sellers are related, the price is always lower than normal. And, a house that had a fire or a suicide are often stigmatized. There are any number of reasons a home sells for less than what its real market value should be.

Did your sale include a lot of personal property (washer, dryer, refrigerator, freezer, riding mower, pool table, etc.)? Possibly you could adjust the contact price down and have these items paid for separately by the buyers as they are considered personal property and are not included in the appraiser’s estimated value of your home.

Appraiser errors:

Appraisers have been known to make factual and judgment mistakes. The human element can cause appraisers to unintentionally slant an appraisal against your home due to such things as bias against old homes, certain neighborhoods, styles of home, pets, etc. If interested, the Next page has a list of real appraisal mistakes.  

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