In real estate, there are several circumstances when your entire transaction hangs in the balance, based on the results of an appraisal:
When you are buying a home, you need the appraisal of the home you are buying to match or be higher than the price you have contracted.
Conversely, when you are selling your home, you will want to appraisal value to match or be higher than your selling price.
And finally when you are refinancing your home, you want the appraisal to be as high as possible.
So what do you do if that all-important appraisal comes in lower than expected?
Don’t panic: Take a deep breath — there many ways to tackle this scenario! Save yourself the stress and don’t freak out.
Obtain a copy: Have your real estate agent or mortgage officer obtain a copy of the appraisal for you so you can review it in detail.
Review the comps: You and your real estate agent need to review the list of homes that the appraiser used for comparison. This is the most powerful tool you have to contest an appraisal. The selection of the comparable homes used can show a wide variety and variances. You and your agent will want to examine the ones the appraiser selected.
Look for these key comparisons:
a. Square footage
b. Lot size
c. Location on the block of each home
d. Condition of the homes
e. Age of the homes
f. Amenities of the homes
g. Custom home vs. tract home
4. Look at homes in the same neighborhood: The homes used in the appraisal should be in the very same neighborhood as yours, especially if some of the surrounding neighborhoods are less desirable than yours.
5. Check into the school district: This can be a significant value changer for many neighborhoods. Homes in significantly better school districts are more desirable and generally priced higher than their counterparts in sub-par districts. Be sure all homes in the appraisal share the very same school district. This can make all the difference.
6. Contest the houses used: If you find any significant discrepancies with similarities of the homes the appraiser used, have both sellers and buyer agents put together a list of more accurate home comps that would justify the price you need.
7. Investigate permit issues: Has the appraiser taken off value for room additions, or upgrades that don’t have permits? Often times, permits are not filed properly originally, or the appraiser was not able to find some of them. An entire room or bath addition is a huge plus for your home’s value. Without a permit, the appraiser can’t include it. So if something is missing a permit, march to city hall and start digging into files to find it yourself!
8. Brag about your house: Compile a list of amenities and improvements! Basically, list all the things that would show your property having higher value than other comparable homes. Granite counter tops, central heating and air, hardwood floors, upgraded bathrooms, location on a cul-de-sac, mountain or ocean views, energy efficient systems, etc. They all matter and should be touted!
9. Scrutinize the appraiser: Yes, you can even question the bank or mortgage company about the actual appraiser. There are a few key factors that could bring his valuation into question:
a. Did he or she actually enter and walk through home, or did they only do a drive by?
b. Is the appraiser local? Is he familiar with nuances of the neighborhood?
10. Ask the appraiser to reconsider: Once you have copies of all your comps and any other supporting documentation, you can present all that to the appraiser and ask them to reconsider their determination. This is usually done via the bank or mortgage company that originally ordered the appraisal.
11. Demand a second appraiser: If the appraiser refuses to reconsider his determination, and you and your agent feel there is supporting evidence that would significantly alter the outcome of the appraisal value, you can send a demand letter to the bank or mortgage company to send out for a second appraisal.
12. Order a brand-new appraisal: Finally, if all else fails, you or your real estate agent can order your own appraisal. There is a cost for that and you would have to pay for it out-of-pocket. There is no guarantee that it will come in at a better value, but if you and your team feel confident that the value should be higher, than it may be worth the expense. You can also try to have the cost split between the seller and buyer – as it benefits both.
Home – Where your story begins…
To learn more about how Coldwell Banker Grass Roots Realty can help you buy or sell a home, please call one please call one of our four offices in:
Grass Valley Office at 530-273-7293
855 Sutton Way, Grass Valley, CA 95945
Nevada City at 530-265-3282
108 Union Street, Nevada City, CA 95959
Penn Valley at 530-432-1131
11364 Pleasant Valley Rd, Penn Valley, CA 95946
South County/LOP at 530-268-1575
10193 Combie Rd, Auburn, CA 95602
