When you sell your house, it’s natural to be anxious about the home appraisal—that jittery, can’t sit still, must do something to stay in control… kind of anxious comes with the territory. If you’re under contract with a buyer whose level of financing will depend on the home’s appraised value, they are liable to be just as nervous.
Your urge to take action, however, could backfire or just be a waste of time. Water the lawn in hopes that a greener yard will boost your home’s appraised value, and whoops, now the appraiser’s job of measuring the home from the outside becomes a muddy endeavor. You also might be tempted to stick around for the onsite visit and end up causing distractions or delays.
As far as the appraisal goes, you want to be in the know and educated about the process, and take steps to get the house looking presentable. But there are a few instances where taking a backseat and letting the situation play out as it will is actually advantageous. At the end of the day your house is worth what it’s worth—you can make plans to challenge the appraisal in the event that it does come in under contract, but it’s better to cross that bridge when you come to it.
Without further ado, let’s review 10 home appraisal do’s and don’ts you’ll be glad you knew when selling your home.
Do: Go into the appraisal with a firm understanding of your home’s fair market value (look to a top agent for help)
An appraiser’s job is to provide an impartial opinion of a home’s fair market value. Appraisals are widely used when the buyer of your house is financing their purchase with any type of mortgage, whether it’s conventional or government-insured.
Typically a lender will go through a third-party appraisal management company (AMC) to get an appraisal on a property before closing, which helps to ensure that if the lender had to seize the property in the event of foreclosure, the home is at least worth what the buyer paid and they could resell it. This step in the home sale process may seem like an annoying formality to you as the seller, but an appraiser’s assessment also holds a lot of weight for the buyers of your home.
Imagine a buyer pays $275,000 for a home, but a year later she loses her job. Rather than face a potential foreclosure, she decides to put the house on the market and use the funds to pay off the outstanding mortgage debt and free herself of unsustainable housing costs given her new situation. Unfortunately, she realizes that when she bought the house, it was overvalued and now she will have to sell it for a loss, in the end actually owing money on the whole deal.
An appraiser researches comparable sales and will complete an onsite visit to evaluate factors affecting a property’s value, such as its lot size, square footage, zoning classification, foundation type, as well as its overall condition and any physical defects that would affect the home’s livability.
You can reduce some of the uncertainty about whether your home will appraise if you’ve worked with a real estate professional to price your home right from the start. A top local real estate agent will have a firm understanding of area market conditions and what homes like yours are going for. They’ll conduct what’s called a comparative market analysis to evaluate recently sold homes similar to yours in size, age, condition, and location.
Ideally when you get to the appraisal stage, your agent will have done the legwork to estimate, to the best of their ability, your home’s fair market value, so their price and the appraiser’s opinion align for a smooth closing. It doesn’t always work out that way, and there will be some factors out of your control, but you’ll help mitigate the chances of a low appraisal if you:
- Work with an agent who doesn’t try to “win” your listing with an unrealistic sale price.
- Stick within the guidelines of true comps (meaning, you don’t try to compare your home’s value to one across the street that has more space or perhaps was recently renovated).
“I make sure that I’m careful to pull true comparable homes that are available so that we’re not pulling a three-bedroom two-bath to compare to a four-bedroom four-bath,” said Dixie Hightower, a top real estate agent in the Houston, Texas, area with 23 years of experience.
Don’t: Assume a higher offer means your house will appraise
In a competitive market, offers can escalate quickly, but if they come in above what the house is worth in the appraiser’s opinion, this creates a shortfall for the buyer, who either has to make up the difference or could choose to back out of the sale.
“As a seller, a low appraisal, if accurate, means you will have to lower your home’s price to get it sold,” notes Investopedia, an online network of financial advisors since 1999. “No one wants to overpay for a home.”
A HomeLight survey of more than 900 top real estate agents for the first quarter of 2019 found that buyer financing problems (6.33%) and low appraisals (3%) were among the common causes for settlement delays.
For Hightower, this issue arose with four offers that were all above the expected appraisal amount on one house. She and the sellers chose the offer that wasn’t the highest but that they thought reflected the property’s true value.
“If we would have taken the highest offer that came in, then down the line if it didn’t appraise [at that value], we would have had to either renegotiate the contract … or we could have lost the deal altogether,” she said. “If you do it right upfront, you can have the buyer pay the difference.”
Do: Prepare your house like you would for a showing
You might be in packing mode by now, but that’s no reason not to give the appraiser the same experience as the buyer during the showing. That means making your home presentable: remove pets, pick up laundry, wash dishes, and put away everything to make the home feel inviting. “It’s better to be vacant than have a lot of clutter and things laying around so the appraiser can see what the buyer saw,” Hightower said.
In fact, most top agents in HomeLight’s recent survey—about 97%—recommend that sellers open up curtains and blinds to let in natural light when showing their house, especially in the spring. Deep cleaning alone costs about $167, based on data from HomeAdvisor.com, but has an estimated added resale value of over 900%, according to our survey respondents.
Other ways to add value without a huge investment include:
- Declutter countertops
- Wash windows
- Dust shelving and out-of-the-way spots (lamps, ceiling fans)
- Wipe down cabinets, closets and baseboards
- Polish hardwood flooring
- Wash pet beds and crates
“Markets don’t require perfect houses, nor is that what we expect to see at certain price points,” said Mike Ford, a Southern California-based general certified real estate appraiser since 1986.
That said, make sure the appraiser at least has access to any usable square footage like the attic, basement, or storage areas.
Don’t: Neglect the outdoors
We get it: Who has time to mow the lawn when you’re trying to pack for a move? But appraisers also view the exterior, and if they use Fannie Mae’s Uniform Residential Appraisal Report, they’ll also include photographs of the front exterior, back, and street scene, plus sketch the exterior of the property.
“Don’t underrate curb appeal,” Ford said. “It’s also indicative of overall maintenance levels.”
If you have a wooden fence, is it stained or painted, or chipped and peeling? What about the eaves, or cracks in the concrete? Are they just tree roots, or something much worse?
“Minor concrete cracks are normal,” Ford said. “A crack in the roadway leading up the driveway in line to the house foundation with corresponding hairline or larger cracks in the stucco siding is going to be called out.” That likely would involve follow-up with a soil or structural engineer, he said.
“Cracks in the sealant around an in-ground pool are indicative of neglect and potentially water intrusion under the pool or even nearby house foundations,” Ford added. “We try not to speculate, but if that rear sliding door on a house with a slab foundation sticks and has patio cracks leading up to it, there could be problems.”
Do: Collect your records for home improvements and upgrades to show value
Appraisers many times will check permits for building work and note the age on certain amenities. But having receipts to show that you installed a Trane air conditioner for $7,000 within the last year, for example, or kitchen cabinets that are worth $60,000 contributes to the overall value.
Your agent also can provide his or her comparable homes to the appraiser to show how the agent calculated the value, perhaps noting a feature that’s seasonal or that isn’t obvious. Santiago Valdez, a top real estate agent in Chicago, likes to call attention to a property that gets good natural light because of a higher ceiling or a large number of windows. “Light in Chicago is incredibly important,” he said.
Likewise, he’ll indicate if a condominium in the comps bunch has sold at a lower price because it’s close to a noisy air conditioning unit, something an appraiser wouldn’t notice during the winter.
Don’t: Plan on getting back every dime you spent
Put simply, there’s a difference between upkeep and upgrades. If your home needed a new roof or a hot water heater, those might have been big-ticket expenses, but they won’t add value as much as having a cover on the patio. Roof maintenance and working appliances are considered necessary expenses.
If you spent thousands of dollars on landscaping, that’s considered an upgrade, which would add value, as well as any modification—such as finishing a basement—that adds more heated square footage.
Other items that add value include:
- Energy-efficient appliances
- Fireplaces or wood stoves
- A deck or patio
- A porch
An in-ground swimming pool adds value, but only to a certain extent. As long as the pool is functional, an appraiser doesn’t add greater value to one that cost $120,000 to install versus one that cost $35,000.
Your home also might have features that add marketability more than value. “Bidets are popular in Europe and some high-end housing, but are not really a typical American expectation in a house,” Ford said. “Real gold-plated faucets in a $400,000 house may be pretty, but they won’t necessarily prove to add any more value than the brushed stainless steel or even plated brass.”
Do: Leave for the on-site visit
Sometimes the seller inadvertently gets in the way—or emotions do, spurring the seller to challenge the appraiser on the spot. Ford said he doesn’t mind an informed owner or an agent present, but “let me do my job with minimal conversation when I’m measuring and recording numbers. I’m fine with comments in the room by room inspections, or if the owners prefer, we can sit down afterward and discuss everything they believe to be important.”
Because you don’t know the appraiser’s comfort level, Hightower said she recommends that a seller leave their receipts and other documentation that they’d like to show the appraiser on the counter, or with the agent. She’ll also relay any questions and concerns that the sellers have.
Don’t: Underestimate the value of having your agent represent you
Even though your agent hasn’t lived in your house day to day, he or she is trained to represent you and your home in its best light. Ford was a real estate agent for 6 years before working as an appraiser for 34 years and said he wouldn’t dream of appraising a house without the agent there. Otherwise, why hire the agent?
From his standpoint, “I’m looking for the agent’s more meaningful, and supportable, proper price or value information. Not ‘I need this amount’ but ‘We truly believe it’s worth this amount based on these specific sales.’ I don’t see it as a contest.”
Do: Decide what you’ll do if the appraisal comes in under contract
Appraisals can be lower than anticipated for several reasons, including a lack of local market knowledge on the part of the appraiser, or a foreclosure, bank-owned property, private sale, or distressed property skewing the comps.
If the value isn’t what you and your agent expected, double check the basic data on the appraisal report and how the appraiser described your home’s features.
Your agent also can challenge the appraisal through an appeal procedure called “Reconsiderations of Value,” according to the Appraisal Institute. Essentially, this means the lender evaluates the appraisal alongside your agent’s documentation of why the property should have appraised for more.
Hightower went through this process once over the past year. “We were able to get it up by a good percentage. Then the seller and the buyer met in the middle on the price.”
You and your agent can easily find common ground with the appraiser, especially if the mistakes were simple inaccuracies. “If there really is an error, 99 percent of appraisers will want to fix it, even if it doesn’t change the valuation of the property,” said M. Lance Coyle, a Dallas-based appraiser and a past president of the Appraisal Institute, in an article by Freddie Mac.
Don’t: Call up the appraiser in the heat of the moment
When you find out that your house didn’t appraise, your first instinct may be to pick up the phone and have words with the appraiser. But appraisers actually can’t talk to the sellers (or buyers) of a home about its appraised value. In addition, appraisers will be able to support their opinion of value 85%-90% of the time, according to Ford.
Most commonly, a house will fail to appraise if you got an inexperienced appraiser and/or the appraiser pulled in comps that skewed the data, such as a house that looks similar to yours but sold for less due to a divorce situation.
That doesn’t mean you can’t challenge an appraisal. Just go through the proper channels. As the seller, you won’t automatically get a copy of the report, but you can request one and the lender will have to provide it to you in 30 days. Take a breath and figure out your next steps with your agent…the worst thing you can do in this case is go rogue.
Bottom line: Although this may be a stressful step, it’s a vital part of the home sale process—and one that all sides want to go well.
Header Image Source: (Croissant/ Unsplash)