Evaluating the valuation: Home Inspection for Buyers and Sellers – Beware!
Many real estate agents complain low appraisals kill their deals. Agents point the finger at appraisers, claiming they set the property value too low; appraisers point back, arguing agents’ expectations are too high. What’s an agent to do?
Get proactive. As an agent, you can ask an appraiser to:
1.Consider additional property information.
2.Provide further detail or give an explanation of how the appraiser came to his conclusion.
3.Correct factual errors in the report.
Before the appraisal:
Meet the appraiser at the property. Provide the appraiser with any information that will help them arrive at a proper valuation.
For instance, if you are aware that the property recently sold down the street was a distressed sale, or was priced as a “fixer” and repaired after it sold, make sure to bring it to the attention of the appraiser.
Careful, though — federal and state laws control conduct when interacting with appraisers.
Once the appraisal is completed
READ THE APPRAISAL REPORT! Don’t just check the value. It only tells you the end result. Read the report to make sure the data used and the adjustments made are mistake-free.
Make sure the details about the home are correct. Look for details about the property’s physical features, such as number and type of rooms, square footage, garage spaces, kitchen upgrades and other amenities which add value. Inaccuracy and omissions of the property’s features may adversely affect the appraised value.
Know the difference between improvements and regular upkeep. Remodeling the kitchen with new cabinets and granite countertops is quite different from merely replacing flooring and painting walls. To be considered in the appraisal, home improvements must be major capital improvements, such as a new kitchen or bath. Have the seller provide records and receipts for these improvements.
Check the comparable sales data. Knowing the local inventory and recent sales helps you determine if the comps used were described and adjusted for properly. If one of the comps was a “distressed sale,” but no mention of this is made in the report, bring this to the attention of the appraiser. Also, note if the appraiser used comps outside of the neighborhood, which may be in less desirable areas. Different school districts, ZIP codes and crime rates can lead to inaccuracies in the market value of the property.
It’s not common, but it is possible for appraisals to be miscalculated.
Make sure it’s a real mistake. It’s not just about getting the value you want. A real mistake, such as transposing decimal points or making a calculation error, can result in a bogus valuation.
Appeal the appraisal. If you identify a problem in the appraisal report, bring it to everyone’s attention and appeal the appraisal. Adjustments aren’t typical, but they do happen
Scrutinizing the appraisal report may not always provide the value you are seeking. But if it can save just one of your deals, it’s worth it.