Buying or selling a home is a very involved process. There are inspections, loans, house viewings, and at some point in the process, an appraisal. The appraisal is often a very nerve wracking part of the process for both the buyer and the seller. The appraisal heavily influences the ability of the buyer to secure a loan and the price of the sale for the owner. If you are about to buy or sell a home, you should be aware of the following seven facts about getting a home appraisal.
Methodology – A common misconception about appraisals is that the appraiser walks through the home, examines everything in it, evaluates each little bit of the house, and then adds it all up to get a final value. That is an option for appraisers in incredibly rare cases, but it isn’t the usual method. The most common method, used in almost every case, is the sales comparison approach. When using this method, the appraiser compares the home to other recently sold houses with a similar design that are located in nearby similar neighborhoods. Most appraisers look for at least three such recent sales as comparison and some use six or more. If your neighbor’s nearly identical house sold yesterday, you can rather accurately guess what value your house will be appraised at.
Second Opinions – Often the buyer, the seller, or both parties may want a second opinion if the appraisal comes back too low. Either party has the right to pay another appraiser for that opinion, but you shouldn’t expect different results. Most appraisers that work a given area are drawing from the same set of real estate records, which means they are making comparisons to the same houses. As a seller, you are better off making at least one major improvement to your house before requesting a second opinion, with adding a bathroom being your best chance at getting a significantly higher opinion.
Communication – Whether you are the buyer or the seller, you should avoid almost all forms of contact with the appraiser. Home appraisals are supposed to independent. Any form of pressure or influence from an interested party may cause the appraiser to quit the job. If this happens, the appraiser still gets paid. Nobody wins except for the appraiser who got paid for doing half a job or less. There are a few forms of contact that are appropriate and even necessary, though. For example, if the appraiser has questions for you, make sure to answer them as honestly and quickly as possible. If you feel the need to contact the appraiser for any other reason, you should contact your real estate agent or realtor first to find out the best way to do so without potentially hindering your purchase or sale.
Access to House – There is one additional form of communication with the appraiser that is both appropriate and often appreciated. Assuming you are the seller, you should make every effort to give the appraiser full and easy access to your house. Sometimes the bank or your real estate agent may handle this, but sometimes you will set up an appointment directly and may be needed to provide access during the actual appointment. Whichever the case, you should go out of your way to provide full access. Double check every lock in the house and make sure you have a working key and a working copy of that key. If you have exterior buildings, a cellar, or an attic, do the same for those as well. In addition to making sure all locks can be opened, move any heavy objects that may be blocking or limiting access to an area. It is really easy to forget that the fuse box is in a closet in the basement with a padlock on it. When the appraiser can’t get into that closet, someone will be on the hook to pay a return fee so the appraiser can finish the inspection.
Furniture – As a seller, you will probably want as high an appraisal as possible. You will likely put on some fresh coats of paint or fix up the aging shed. These small fixes are sensible, but keep in mind that some things simply do not affect appraisal value. The most pertinent example is furniture. Unless it is infested or moldy, your 15-year-old couch will have absolutely no effect on your appraisal value. Don’t waste time, effort, or money replacing or hiding scratched tables, cracked lamps, or dirty rugs. Even your carpets aren’t that big a deal unless they are completely unsalvageable, since a carpet cleaner is almost always brought in before a house is transferred. You may be fixing this stuff up for showing off to a potential buyer, but the appraiser won’t care at all.
Major Projects – Are you adding a new bathroom to your house, building a garage, or retiling the roof? If you are in the process of some major project, do not get an appraisal for the house until it is complete. Potential buyers may be satisfied with seeing the work and knowing what it will look like, but appraisers can’t include an unfinished project in an appraisal as anything more than a note. Until that third bedroom is complete, your house will be treated as a two bedroom house for the purpose of appraised value, which is meaningless for both buyer and seller.
Cost – The average cost of an appraisal is between $300 to $400 for a single house. Costs vary based on location, but the existence of appraisal management companies means they are often standardized. Particularly difficult houses or out of the way locations may incur much higher costs. The base cost is almost always paid for by the buyer, though extra fees usually aren’t if an appraisal management company is involved. If you are selling, you will usually pay nothing for an appraisal, but you may be liable for return trip fees if your house is inaccessible during the appointment. Additionally, agreeing to pay half or all of the appraisal fees will often help you negotiate a better contract with a buyer.