With Upper Valley home prices on the rise ( finally!), I thought it might be time to address potential problems with the appraisal process and things you can do to help minimize the fall- out from the housing bust . After an extended period of falling home prices and excess home inventory, the appraisal process can be a stumbling block to a new home purchase or sale. Appraisals are based on recent sales prices of comparable home prices- taking into account things like size of the dwelling, location, age, condition, etc. If prices have been low, appraisals reflect those lower prices even in a time of recovery. In a rising market, the historical sales data used for comparative purposes might not support the purchase/sale price of the latest offer.
There are several reasons to obtain a home appraisal. If you are a home owner, you may be hoping to refinance to lower your rate or to obtain a home equity loan, you may want a pre-listing appraisal to help you determine the likely value of your home before you sell, or you may be attempting to have your tax assessment reviewed. If you are a buyer, you will need an appraisal to satisfy your lender ( if you have one) or to help you determine whether or not your offer is in line with the fair market value.
As a home owner, there are a few things you can do to help ensure you get the highest appraisal value for your home. Lou Carlozo of reuters.com suggests the following:
- make sure the appraiser is familiar with your neighborhood
- do your homework and be familiar with your own comparables ahead of having the appraisal done
- know what adds the most value ( kitchens/bathrooms/wood floors/ landscaping)
- document your home improvements- appraisers will need to know when the work was completed
- clean up! ( inside and outside)
- give the appraiser some space- do NOT follow the appraiser around the house
As a buyer, educate yourself about the appraisal process. (Below are two links that contain appraisal worksheets.) Familiarize yourself with what your lender is looking for. Ask your realtor for comps so that you understand the town, the neighborhood, traffic patterns, shopping centers, dining spots, cultural venues, and recreational options. Don’t be afraid to ask questions of your lender, your agent and of the appraiser.
Freddie Mac Appraisal Worksheet
The appraisal is an important piece of any real estate transaction. It’s fundamental purpose is to provide a well-documented and equally well- researched, impartial estimate of property value that protects the interests of all parties: buyers, sellers, lenders, etc.