Our market has become so dynamic and as expected the most appealing, well-priced homes are selling. While there are fluctuations in the market, overall, there is still downward pressure on pricing and the buyers are in the driver’s seat in most price ranges. Another consideration of growing concern for sellers in this market is the appraisal process. With lender requirements tightening, the appraisal has become a focus on many transactions. Appraisals are ordered after contracts have been signed and the lender is reviewing the borrower’s information.
Enter the Appraiser. This is the person that is contracted by the lender to give an “opinion of market value” or what the home would likely sell for on the open market. The appraiser is held to strict ethical guidelines and uses a USPAP form (Uniform Standards of Professional Appraisal Practice). This detailed report will include condition of the home, location, neighborhood, and comparables selling near the home (usually within one mile) and other variables.
They use active, pending properties and sold comparables within the past 90 days, if comparables are available. Appraisers attempt to get the best information from the market. Essentially, they are looking to see how the subject property competes against “comps” in the market. The USPAP form includes a grid with detail and adjustments made to the comparables against the subject property.
The biggest challenges in any real estate transaction occur when the appraisal comes in lower than the sales price. This immediately impacts the buyer’s ability to borrow and what the buyer is willing to pay. An appraisal that does not support the sales price can be another point of negotiation for the buyer. We suggest to some of our sellers to order an appraisal up front so they can see how a typical appraiser would analyze the market value of their home. Appraisals can run between $350-500 or higher, depending on the price range and detail needed. It is money well-spent by a seller to get a handle on what to expect.
So, it’s not just the buyers and the sellers who have to be amenable to the transaction. It’s also the appraiser. Keep this in mind when you enter any real estate transaction.