6 Ways to Prepare for the Appraisal Process
June 8, 2016 |
The central Ohio housing market is being threatened by low appraisals. According to a recent Dispatch article, “…appraisers are concluding that some homes simply aren’t worth what buyers are offering to pay. The findings are forcing deals to be renegotiated and, in some cases, killed.”
Appraisals are used by mortgage companies as a way to check a home’s value. Appraisers normally take at least three comparable properties and look at many different factors. In a hot sellers’ market, like the one we are in now, prices are going up so fast that the appraisers can’t keep up. What a house sold for six months ago is more than likely much less than what someone will pay today.
Lenders will only loan the amount given in the appraisal. If an appraisal comes back even a little low, it can threaten the deal because homebuyers can’t/won’t put the extra cash up and most sellers don’t want to drop their price.
We’ve put together a list of things real estate agents can do to combat the threat of low appraisals.
- If possible, meet with the appraiser and always bring comps, or “comparable homes,” that support the value of the home you are listing.
- In higher price points, or multiple offer scenarios, sellers may want to ask buyers to waive the appraisal contingency.
- If you have an appraisal that just came in low, appeal it. This doesn’t always work, but there have been cases where appraisers have adjusted their values after an appeal. Politely and respectfully show cold hard facts (your comps) to explain why you believe the value is justified.
- If an appeal does not work, look at all options before letting the deal fall through. Sometimes buyers and sellers can each give a little to get the deal done.
- Educate all parties involved prior to the appraisal process. Let buyers know this is a problem so that if the appraisal does come in low, they are already aware of their options. The same goes for sellers. Educate them that this is a very likely scenario that may happen to them.
- Don’t panic! Low appraisals are a common issue when you have a hot sellers’ market. Every deal has its challenges, and in such a hot market, a low appraisal just might happen to you.