Common Questions about Appraisals

If I pay for an appraisal now, will the buyer be able to use it? A couple of factors will determine whether or not a buyer can take advantage of your appraisal. The most important lies with the policy of the lender which will be handling the buyer's financing. It is completely within the lender's rights (and more than likely) that they will want to order a new appraisal. In addition, there is the question of timeliness. If you have a professional appraisal done now and it takes 4 months to get a contract on your house, it is probable that the lender will require a more recent appraisal.

Is the value locked in stone? Absolutely not. An appraisal, no matter how scientific, still ends up being the professional opinion of the appraiser. The appraiser must compare, for example, the condition of your house in relation to the comparable properties, which to some degree is a judgment call. Nevertheless, an appraisal will give you a reasonably good idea where your house fits in relation to recently sold properties. From that point you are well on your way to setting a fair price.

Where can we find an appraiser? You will need an appraiser in your local area, so you can check your yellow pages.

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The Appraisal Process

All appraisals must conform to guidelines set by the Federal Reserve, but every appraisal is ultimately a subjective analysis of a property's current market value. True market value can be difficult to ascertain in markets where prices are volatile and properties vary widely. To determine current market value, an appraiser will compare the price of your home with that of at least three comparable homes that are in the area and have sold within the past six months, then adjust for differences in the properties. An appraiser will physically measure and inspect the home (which doesn't qualify as a home inspection) to compare, and may also take photographs to include in the report with floor plans and a site map.

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What An Appraisal Entails

An appraisal is, simply, an "opinion of value" by a professional appraiser who visits the home and inspects the size, condition, quality and function of the home. The appraiser will generate a detailed report and will generally use comparisons to the sale prices of similar homes in the area to determine a value of the home that is being appraised--known as the "subject property. Comparisons can be made to square footage, appearance, amenities and overall condition.

An individual home's value can be adjusted up or down in relation to what properties are actually selling for in the neighborhood. For example, a home with 4 bedrooms will generally carry a higher value than a home--in the same area and in roughly the same condition--with only 3 bedrooms. A home that needs exterior painting will carry a lower value than a similar home that has been recently painted.

Appraisal

Your lender has an appraiser inspect the home and prepare an appraisal, which is a report estimating how much the house is worth. Your lender wants to make sure the house is priced right -- they don't want to loan you $180,000 to buy a house that's worth only $135,000. The appraiser bases his/her appraisal on the amount that similar houses in the same area have sold for, and the potential rental income if the house is a duplex.

Tips on Hiring an Company for House Appraisal

There are many things to consider in order to hire the right company for house appraisal for your specific appraisal needs. I highly recommend the use of a state licensed house appraisal company, because most states appraiser licensing boards only have jurisdiction over state licensed appraisers. Additionally, state licensed appraisers are required to meet federally mandated requirements including appraisal courses, continuing education, experience and a test.

How to Dispute a Home Appraisal

Dispute the Appraisal

Ask the lender for another appraisal. The lender may send out a new home appraiser or ask the original appraiser to reevaluate the property.

Ask your agent to find out which houses were used as comparables. Does the agent agree they were good comps? Most appraisers haven't seen the comps up close and personal the way agents do. The home appraiser might have unknowingly used houses that needed a lot of work. If poor condition is verified, ask the appraiser to investigate the comparables to see if adjustments should have been made.

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