The Buyer, the Seller and the Appraiser

Think only a buyer and seller need to agree on a sale price of a home? Think again. Due to stricter lender guidelines, appraisals are playing a larger role in our real estate market.

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.

Richard Recuset May 21, 2011 at 12:09 AM
The moral of this story, and it's point on; Sellers, get an appraisal before listing. This is a requirement for my sellers. Otherwise you're leaving it to chance, no need for that. Richard Recuset Realtor 786.287.9272 RE/MAX Premier Associates http://teamDoral.com
Melissa Riley May 23, 2011 at 04:39 PM
Ben, Appraisals do play the same role, however, there seems to be more challenges due to lack of comps and certainly foreclosures and shorts. And, I agree that sellers cannot use a previous appraisal. But, it does give them a sense of the market that can be helpful in "right" pricing of their home. Thank you for your feedback.
Melissa Riley May 23, 2011 at 04:41 PM
Hi Richard, Ordering an appraisal up front has been helpful to our sellers. It's just another source of reliable information, especially with pricing being a potential moving target in this market. Thanks for posting!
JDAppraisal May 26, 2011 at 01:37 AM
I enjoyed your article and it was accurate except for "The USPAP form includes a grid with detail and adjustments made to the comparables against the subject property" as there are no "USPAP forms." There are Fannie Mae/Freddie Mac forms like the 1004 and such though. You did describe USPAP well otherwise. Check out my appraisal blog, dealing with appraisers and their interactions with agents, homeowners, lenders, and attorneys at JDAppraisal.com
Bobby June 08, 2011 at 06:40 PM
<a href="http://www.arensgroup.com">Property Appraisal</a> is an important aspect of the Real Estate transaction that many don't consider until it's too late.


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