Step 14 for Home Sellers: Appraisal

What IS an Appraisal and Why Do I Care?

The job of an appraiser is to determine the value of the property you are selling to the Buyer.  The appraiser is paid by the Buyer, but functionally the appraiser is working on behalf of the lender.  You and the Buyer have agreed to exchange ownership of this property for X dollars – let’s say $320,000.  But does that mean that the home truly IS worth $320,000?  An old tenet of economics is that something is worth whatever someone else is willing to pay for it, but this is not true in home purchases anymore.

Let’s keep going with our example.  If the appraiser agrees that the house is worth $320,000 then all is well and the transaction goes forward without incident.  However, if the appraiser values the home at $300,000, then there is a problem.  First, the lender will only loan the buyer enough funds to buy a $300,000 house.  Conversely, if the appraiser values the house at $350,000 then the sale goes through and the Buyer has instant equity.

So the dangerous scenario for closing came if the appraiser does not value the house at a level at or above the agreed upon purchase price- $300,000 in our example above.  If this happens, the Buyer’s Realtor will ask the Seller to accept the appraised value.  If you, the Seller, refuse to accept $300,000 we may yet try to agree on some figure between the appraised value and the purchase price previously agreed upon.  If Buyer agrees to a figure in-between the agreed purchase price and the appraised value – say, in our example, #305,000 – then the Buyer will have to bring an additional $5,000 to the closing to cover the deficit between the two figures.

What if the Appraised Value and the Agreed Upon Purchase Price Don’t Match Up?

The Seller can refuse to come down on the agreed purchase price, but if they do, the buyer can refuse to go forward and can exit the transaction and get back the earnest money – this is a standard legal protection in the Purchase Agreement.  But this far into the transaction it is often hard for either side to walk away.  This is a very charged negotiation if it happens because the appraisal is usually one of the last steps and both sides have already planned on closing.

How does Watson Concierge Realty Group Plan for Appraisal?

One of distinctive services is that we see this step as vitally important and we plan for it. From the time we take your listing, we have your future appraisal in mind.  We prepare a packet of information which we hand to the appraiser in person if possible- if not we email it to them and phone them to tell them it is in their inbox.  Appraisers do not welcome anyone coming to the property with them, but they are typically willing and sometimes even appreciative of the packet.

Our appraisal packet contains the comparative properties we used to determine our listing price.  It is updated at the time we go under contract again to justify our price compared to other homes in the area.  We try to stringently match appraisal criteria (in other words, we try to pull homes in the same school district, within 1/2-1 mile, with similar distinguishing characteristics.)  We try to provide comps that justify our price and we also try to note why other comps- ones that don’t justify our price- should be excluded.  Both are useful to our cause. Finally, we add a list of features, upgrades, and improvements that bolster our case and last of all we provide market data about our Seller’s property: how many people came to see it in how many days, how many offers we had, and how our days on market compare to others- if these items are useful in making our case for the price we have agreed upon.

Few other Realtors spend as much time, energy, and work on the appraisal step, but we believe it is crucial to serving the needs of our Sellers.  If an appraisal comes back low, a Seller’s Realtor can appeal that valuation, but in our experience it is almost impossible to get an appraiser to change their value once the report is out.  If, however, we get our data into the hands of an appraiser BEFORE their report is made, we may provide info that allows an appraiser to justifiably come to a conclusion that supports the agreed upon purchase price, which helps all parties get safely to the closing table.

NNoWhen is the Appraisal Done?

The appraisal is to be ordered promptly once a purchase agreement is accepted.  The lender orders the appraisal.  It may take 7-10 days for the appraisal to take place and it can take up to another week for the appraisal report be returned to the lender. Appraisers are usually assigned through a pool of providers that are approved through the lending company.



More questions about appraisal?  Please get in touch – I would be happy to discuss this issue, or any other questions you have related to Real Estate:

Maureen Watson: 317-752-3377                                  

Posted on December 3, 2018 at 3:30 am
Maureen Watson | Category: Steps for Sellers | Tagged

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