Selling your house? How much do you know about the home appraisal process? And did you know that as a seller, there are a few things you and your agent can do to help the final numbers?
What is an appraisal?
An appraisal is an opinion of value that is completed by a licensed appraiser who will inspect and scrutinize the home. The process involves several steps, the first of which includes the assessment of the size, state, function and worth of the property.
For the next step, the appraiser will investigate similar homes in the area and compare current sales figures (comps) to define a fair market value. Only then is the appraiser able to collate all the data and issue an “opinion of value.”
Why appraisals are necessary?
Since a reliable financial institution will not grant a loan without an appraisal, closing the sale depends on an accurate assessment. Without the home appraisal process, the real estate market could not exist.
A bank won’t lend $500,000 on a property that is only worth $ 200,000 because in a worst-case-scenario they could be stuck with a property where they can’t recover their money.
What could go wrong?
With the home appraisal process in place for a good reason, why is there so much anxiety about the outcome?
It isn’t the process itself but when it occurs that makes the appraisal a tense time for both the buyer and the seller. The appraisal is conducted after a price is negotiated, agreements to buy or sell have been made and the contract signed.
An appraisal that is close to the agreed price is in everyone’s best interests.
One way to prevent problems would be to address the possibility of the appraisal coming in below the purchase price in the sales-and-purchase agreement. In this event, there should be allowances to renegotiate the price or terminate the contract.
While waiting for the final “opinion of value” there is nothing anyone can do to help the result. But for the best possible outcome, there are steps both the seller and their agent can take beforehand.
What the seller can do
Have the property look as good as possible for the home appraisal process. Appraisers are people too. By letting your home’s best face show you can help the appraiser see your home’s potential.
Treat the day the appraiser is due as if it’s a show day. Mow the lawn, weed the yard and trim any bushes or shrubs. Turn on the lights, clean the house, spray air freshener and open the shades.
Sit down before the day and make a list of all the repairs and improvements that have been done to the house over the past several years. Things like new gutters or a hot water heater, new fixtures, anything you can think of. It doesn’t have to be very detailed, just a written record that can be given to the appraiser – they will decide what applies to the value.
What the agent can do
A good agent will be there to meet the appraiser, giving them the home improvements you’ve listed and a folder of information on comparable homes that rationalize the sale price.
Your agent can contact other brokers to determine what properties – not yet closed – are currently under contract. This will often reveal homes that are scheduled to sell for a price well above asking and discloses the kind of critical information that the appraiser needs.
Essentially, it’s the recently sold comparables, properties like yours that are the main factors in the home appraisal process.
If the seller and their agent supply the data that can’t be discovered from the listing and home inspection, they can help the appraiser reach a more informed figure.