What’s an Appraisal and Why Does It Matter?

Love Selling Your Home – Week 8This is the eighth article in my series called, Love Selling Your Home: Minimize Your Stress, Maximize Your Profit, Dwell Residential’s step-by-step guide to selling your home “right” even in today’s robust market. My series takes you through the entire home-selling process -- from finding a real estate agent to settlement day. Look for a new, informative article each week, right here!Just because your home is under contract doesn’t mean it’s time to celebrate just yet … your home needs to be appraised and the results could sidetrack the entire transaction. You basically can’t move forward with the buyer until the appraisal is done and the lender has given its stamp of approval!This is an important step of the closing process because it could affect the price you’ve set for your home. You don’t want the appraised value to come in lower than the contract price since the lender won’t approve a loan for more than what the home is worth.Here are the ABC’s of an appraisal and what you can do to protect yourself as a seller:What Is a Home Appraisal? An appraisal is an unbiased professional opinion of a home's value that the lender will use to determine if they will lend money to the buyer of your home. The lender wants to make sure the buyer is not over borrowing and that this is a sound investment in case the buyer defaults on the loan.An appraisal will take into consideration the home’s condition, location, features, local real estate market, and comparisons of your home to the prices of similar homes that have sold recently. A licensed appraiser’s report is much more detailed than a comparative market analysis and is the only valuation report a lender will use. Usually the lender will order the appraisal but the borrower will pay for the report.The report also will include statements on any issues that may hurt the property’s value – this could be structural or even if the property took too long to sell.Don’t confuse an appraisal with a home inspection. Appraisers are not home inspectors since they don’t look for leaky roofs, test appliances, or any other items that you may find on an inspection check-list. Your buyer will still need to get a home inspection after the appraisal comes through.What Can You Do to Protect Yourself?

• You want to have an appraiser who knows the local area and has worked in your neighborhood beforehand. This is someone who could recognize any skewed comps if that’s ever the case. Make sure your lender is working with such appraisers.
• As a seller, you could get an appraisal yourself before you even list your home to help you determine the asking price. You could give this prelisting appraisal to the buyer’s appraiser to add to the data and perspective of the final report.
• You should question a low appraisal to make sure nothing was overlooked or inaccurate in the report. Unfortunately, recent federal guidelines have had appraisals come in below fair market value and can be difficult to challenge.

What If You Get a Low Appraisal?If you get a low appraisal and it’s accurate, you will either have to lower your price or the buyer will need to come up with the difference (which can be very unlikely unless they absolutely want your home).Trying to hold-out for an all cash buyer who doesn’t need an appraisal for a loan can be unlikely too since no one wants to overpay for a home or take on that risk themselves.Stay tuned for next week’s ninth article of my Love Selling Your Home series! Pre-Closing Tasks to Check Off Your List will provide a handy checklist to make sure you get it all done and even tell you what to expect from the buyers (such as an inspection). You don’t want your deal to fall through if you forget something or miss important paperwork.