How exciting you have an offer on your house and on to close you go!!! But we have one more hurdle to master…. the big appraisal question. Will it appraise and what in the world do we do if it does not? Well in good ole yesteryear people were fighting over property so they would just up the ante and away we would go to close. Today however that is not the game and even cash buyers are putting a clause in their contracts, “property must appraise” So for all of us lay folks our there here are a few things that are involved in appraising your home.
Your Realtor can probably come pretty close to letting you know if your home will appraise for its list price. Hopefully you have been a part of the decision process to base your list price on what the market will bear. If you OVERPRICE your home to begin with you are starting at an unrealistic place and starting on the wrong footing to begin with. Don’t confuse a Comparative Market analysis, or CMA with an appraisal. Experienced agents often come very close to an appraisal price with their CMAS, but an appraisers report is much more detailed and is the only valuation that the bank will consider in determining the value of the subject property.
Some of the things that will be seen on your appraisal report are:
Details about the subject property, along with side by side comparisons of three similar properties.
An evaluation of the overall Real Estate Market of the area as a whole and the neighborhood.
Statements about issues the appraiser thinks are detrimental to the properties value such as poor access to the subject property.
Notations about flawed aspects of the property such as cracked foundations, obviously faulty roof and any other issues that would impact property value.
An estimate of the average sales time of the property.
And in today’s market appraisers also take into consideration other listed properties in the area.
Another factor that is most important to remember is that all the short sales and foreclosures WILL impact your property value. I actually feel for my friends who are in the appraisal business today for they can only use what is put before them. I have had customers angry with the appraiser because the property did not appraise but now more than ever they are held to high standards and are questioned by underwriters and are called to justify their findings. It is important to not determine your homes value even on an appraisal that is even 6 months to a year old for the market is in a constant state of change.
It is also important to remember that what you paid for your home has absolutely NO bearing on what your property is worth. WE all wish that were the case. Hopefully if you are selling or buying your will listen to your trusted Realtor to help you to have realistic expectations based on the facts of the market!!! Please be sweet to your Appraiser friends they could probably us a hug and a pat on the back!!! So till next week remember, “The only people we have to get even with are those that have helped us” So go get even!!!!
2 thoughts on “The Skinny on Appraisals in Today's Market”
Karen, I think we have more of an appraisal crisis today than a real estate crisis. It appears to me that the appraisers have become way to conservative.
Fair Market Value is supposed to be the price that a willing buyer would pay and a willing seller would accept in an arms-length transaction.
In todays market we are seeing willing buyers and willing sellers agree on a price; however, the appraiser somehow knows better and the deal falls apart because the appraiser turns in a low value based on auctions, short sales, and distressed sales.
I questioned my 2009 tax appraisal which worked out to $238/sq.ft. & was told that replacement cost was at least $300/sq. ft. & could be as high as $400/sq.ft. A realtor estimates that the market is in the $100 to $110/sq. ft. area. There is something way off! Pity the “normal” seller who wants or needs to sell their property.