An appraisal is an opinion of value. In Real Estate, an appraisal is typically ordered by a bank or mortgage lender. This is to ensure the asset they are loaning you money for is worth what you are paying. Also, in the event you are looking to refinance your home or set up a line of equity, an appraisal will justify the equity you have in the home by determining the value of your home. Equity is the difference between what your home is worth and what you still owe.
What if my appraisal comes in low?
Since an appraisal is technically an “opinion of value” the value you receive may be impacted by multiple factors that are outside of your control. We won’t focus on those, but rather, what steps to take when this happens.
- Enlist help from your real estate professional. Real estate agents have data to help back up the value by providing appraisers evidence of sales like the subject property that have sold. Along with highlighting features the appraiser may have missed.
- Discuss the rebuttal process with you bank or mortgage lender.
- In a real estate deal, you sometimes will have to renegotiate terms of your contract with the selling party. If a gap is there, either you will decide to come up with the difference out of pocket, or meet half-way to ensure the deal stays together.
When does an appraisal happen?
Typically within the first 10 days of the process. When buying, it will be the first 10 days from offer acceptance. With refinancing and setting up a line of equity, it will be within the week you submit the request. They will send a professional appraiser, selected from the appraisal management software, and they will set a time to see your home. They spend no more than 20 minutes viewing, discussing, and taking pictures. After they leave, you can expect the appraisal results within a week after it is completed.
How do I prepare for an appraisal?
This is a question that deserves to be asked and here is why. When people haphazardly enter into the appraisal process and choose to just show as-is, it can impair the value they receive. Put yourself back in the buyer shoes, are clean and tidy homes more appealing than ones with deferred maintenance? I think we can agree that first impressions count! You can do your part to ensure the home sparkles and makes its best impression. Other ways to prepare:
- Make a list of updates/features worth mentioning. Ages of systems and prices for upgrades are always great information.
- Help the appraiser answer any questions when they are there. If you can be home, all the better. If not, see if your real estate agent will be filling in for you.
- Finally, if you feel compelled, you may offer the appraiser a list of comps in your neighborhood that sold to help justify value. A top notch agent will make sure these bases are covered, while also emailing over any competing offers that caused the price to reach where it is.
In Conclusion
Appraisals are an opinion of value. Working with your real estate agent is imperative to improving your chances of success with these hurdles in the buying/refinancing process.