Starting out at the right price point is critical. Statistics from the National Association of Realtors<\/a> show that appraisal issues<\/a> accounted for 21% of delayed contracts and 11% of terminated contracts in December 2020.<\/p>\n \u201cIt\u2019s never fun for a seller when you go under contract and then three weeks in, you find out that your home hasn\u2019t appraised and your deal has the potential to fall apart,\u201d Wilkins says. \u201cI always like to walk them through what happens in that particular situation and what the options are.\u201d<\/p>\n Great idea! Consider this your residential appraisal walkthrough, covering an appraiser\u2019s general qualifications, how these professionals calculate value, and some common misperceptions about residential appraisals.<\/p>\n As a seller, getting your house appraised<\/a> can help you and your agent set an asking price if your market is changing fast or if you have a particularly unique home for which finding comparable properties (or \u201ccomps\u201d) might be difficult.<\/p>\n According to Mike Ford<\/a>, a Southern California-based general certified real estate appraiser since 1986, paying $450 to $550<\/a> is typically the minimum amount necessary for a credible home appraisal<\/a>. Fees vary based on factors like the size of your property, where you live, and the overall complexity of the appraisal.<\/p>\n In a typical real estate transaction, though, you as a seller don\u2019t have to do anything to get the ball rolling. The buyer\u2019s mortgage lender will contact a third-party appraisal management company (AMC)<\/a> to arrange for a residential appraisal, which verifies for the lender that the house is worth what the buyer wants to borrow for the purchase<\/a>.<\/p>\n A residential appraiser must be:<\/p>\n An appraiser must be licensed or certified in your state<\/a>, according to the Appraisal Institute of Chicago, Illinois, a global professional organization of real estate appraisers since 1932.<\/p>\n Some appraisers have additional designations because of their education and experience, such as an SRA (Senior Residential Appraiser) designation<\/a> for appraisers knowledgeable about analyzing and valuing residential real property.<\/p>\n Don\u2019t be nervous if you happen to get a trainee appraiser, adds Mason Spurgeon<\/a>, a certified general real estate appraiser since 2004 who handles appraisals in Missouri, Illinois, and Iowa.<\/p>\n All appraisers must work as trainees first, and they take courses in appraisal principles, procedures, and uniform standards of appraisal practice, he says. Plus, a certified appraiser takes responsibility for a trainee\u2019s work.<\/p>\n While you won\u2019t choose the appraiser who visits your property, the buyer won\u2019t, either, because the appraiser\u2019s client is the buyer\u2019s lender. Appraisers are supposed to be independent, third-party experts \u2014 or \u201can objective and unbiased source of real estate information\u201d \u2014 who work for a flat fee, not a commission. \u201cNeither the lender nor the consumer benefits by entering into a mortgage that is more than the value of the property,\u201d the Appraisal Institute writes<\/a>.<\/p>\n An appraiser might have a large coverage area, but they should be somewhat familiar with the previous sales and market conditions wherever they\u2019re evaluating property.<\/p>\n \u201cIf you get an appraiser who doesn’t really know that neighborhood and the building products and everything else, you can really see some low values,\u201d Wilkins says.<\/p>\n This also comes into play with new economic developments, such as if Amazon.com plans to build a distribution center in your area. Your corner of the market might be hopping, but an appraiser unfamiliar with this news could be out of their element<\/a> and might pull sales to compare to your property that are too old. That\u2019s why it\u2019s wise for appraisers to ask colleagues about an area that\u2019s new to them.<\/p>\n An appraiser\u2019s job involves a review of public records and comparable sales, as well as an inspection of your property\u2019s interior and exterior. \u201cWe don\u2019t turn the faucets on or that sort of thing,\u201d Spurgeon says.<\/p>\n \u201cWe walk through it and do the best we can to see the surface amenities.\u201d<\/p><\/blockquote>\n Regardless, you should make sure that your property is tidy and accessible<\/a> so that an appraiser can measure and view it accurately. Also, gather any relevant paperwork or digital documents<\/a>, which may include:<\/p>\n Appraisers find legal descriptions or parcel numbers helpful<\/a>, provided they\u2019re accurate. Your home\u2019s square footage, easements, census tract, and source of utilities are among the many pieces of information that an appraiser gathers for their final report<\/a>. \u201cI\u2019m very meticulous when I measure the outside of a home. I use a laser,\u201d Spurgeon says. \u201cSometimes the assessor doesn\u2019t measure correctly.\u201d<\/p>\n When you have your home appraised, you\u2019ll need to be transparent about HOA fees and the like<\/a>. New owners need to know about any rules or restrictions they will need to abide by, as well as the details of any dues or fees. HOA and other community fees are especially important to the buyer\u2019s lender who needs to ensure the buyer can afford the fees on top of their mortgage.<\/p>\n Appraisers must note the age and design style of your home, the type of attic and foundation, any car storage, the type of heating and cooling, appliances, and amenities. So any material that you provide can support the reasoning for your asking price. Wilkins suggests leaving this information in a spreadsheet on the kitchen counter for easy access.<\/p>\n Include information about neighborhood amenities, such as walkability<\/a> and schools<\/a>, if you can.<\/p>\n \u201cThere are going to be some things that an appraiser can’t physically see, and that can definitely be helpful. I did have a seller who did this, and they ended up having the highest appraised value in the neighborhood,\u201d she says.<\/p>\n The sales comparison approach: <\/b>This is the most \u201capples to apples\u201d comparison, where an appraiser compares the subject property to others of similar size and amenities, making adjustments for location, physical and economic characteristics, zoning, and even financing. \u201cWe shoot for at least five to six [comparable listings],\u201d Spurgeon says.<\/p>\n The cost approach: <\/b>Think of this as the sum of the parts equals the whole. An appraiser figures out the value of the land as if it were vacant, plus what the new cost of improvements on the property would be, minus depreciation. \u201cThis approach is particularly useful in valuing new or nearly new improvements and properties that are not frequently exchanged in the market,\u201d the Appraisal Institute notes.<\/p>\n The income capitalization approach:<\/b> This focuses on the value of the income that a property could produce, something that turns up more often with commercial and rental property than during a residential appraisal. An appraiser might calculate a property\u2019s expected gross income along with its anticipated annual operating expenses.<\/p>\n For a residential appraisal, Spurgeon uses either the cost approach or the sales comparison approach, depending on the age and style of the property. For instance, the cost approach \u201cis tough to do on a late nineteenth century home. You\u2019ll have twelve-foot ceilings and trim that you can\u2019t replace.\u201d<\/p>\n If a property has particularly unique features and finishes, Wilkins says that she\u2019ll provide an appraiser with the comparable properties that she used to arrive at the asking price. \u201cI do a lot of luxury properties, and \u2026 you can\u2019t just go based on square footage. The interiors are going to be different, from the quality of the woodwork and the cabinetry and the granite. \u2026 So certainly when I have a unique [property], I\u2019m going to utilize those comps and set those out as well for that appraiser in advance.\u201d<\/p>\n In addition to those calculations, appraisers take other factors into account, including:<\/p>\n With the abundance of home valuation tools online and different industry terms for appraised vs. market value in real estate<\/a>, it\u2019s only natural that many homeowners have some misunderstandings and misperceptions about residential appraisals. Here are a few common ones:<\/p>\n If an appraisal is low and the contract value can be supported, you’ll need comps to prove it. Wilkins said one seller terminated a contract involving a four-bedroom, 2,500-square-foot home after the appraisal came back $12,000 low. \u201cBased on the comps that we had pulled, that was below value for that home.\u201d A second buyer and appraisal later, the sale went through.<\/p>\n In other instances, an appraisal may save a buyer from overpaying for a home<\/a>. That way, if said buyer ever falls on hard financial times and has to sell the home, they ideally won\u2019t suffer as big of a loss because they purchased it at the right value to begin with.<\/p>\n Wilkins has found it rare for an appraiser to modify a report unless there\u2019s an error, such as the appraiser listing square footage incorrectly or mistaking a granite counter for laminate.<\/p>\n Ford echoes that you can submit what\u2019s called a reconsideration of value<\/a> to the appraiser. However, about 85%-90% of the time<\/a>, the appraiser will be able to back up their opinion of value.<\/p>\n However, Spurgeon says appraisers do make adjustments. For instance, one of his colleagues recalculated a residential appraisal after an agent pointed out two comparable sales that the appraiser had overlooked. \u201cAn appraiser will admit when we\u2019re wrong,\u201d he says.<\/p>\n Your real estate agent may advise you to give the appraiser space to work, much like with a home inspector, but some appraisers don\u2019t mind chatting with homeowners while taking measurements and checking out the property.<\/p>\n An appraiser\u2019s questions might even prompt them to provide information they\u2019ve previously overlooked. \u201cThey follow me around and talk to me,\u201d Spurgeon says. \u201cIt\u2019s also nice to have the person there in case you see something: \u2018There\u2019s a hole here. What happened there?\u2019\u201d<\/p>\n Even though a residential appraisal can be nerve-racking, agents say to bear in mind that you and a buyer ultimately want the same thing: reassurance of a property\u2019s worth.<\/p>\n \u201cI would definitely recommend that a seller do everything possible to make sure that they’re going to get the most amount of value when it comes to an appraisal,\u201d Wilkins said. \u201cBecause if you get the contract price, obviously, that’s good. But if it goes over and above, that’s going to make a buyer feel really good, too, like they\u2019ve made a really good investment.\u201d<\/p>\n Header Image Source: (I Do Nothing But Love \/ Unsplash)\u00a0<\/span><\/i><\/p>\n","protected":false},"excerpt":{"rendered":" Consider this your complete guide to the residential appraisal, covering an appraiser\u2019s qualifications, independence, and methods for determining value.<\/p>\n","protected":false},"author":76,"featured_media":21966,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[242,322],"tags":[732],"class_list":["post-21961","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-home-appraisals","category-logistics","tag-what-do-appraisers-look-for"],"acf":[],"yoast_head":"\n![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/02\/residential-appraisal-woman-666x381.png\")
<\/a>Starting the appraisal process<\/h2>\n
Licensed and certified:<\/h3>\n
Unbiased and independent:<\/h3>\n
Geographically competent:<\/h3>\n
![\"Two](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/02\/residential-appraisal-paperwork-666x381.png\")
<\/a>Gathering relevant paperwork and information<\/h2>\n
Your most recent tax receipt or deed:<\/h3>\n
Covenants and fees related to a homeowners\u2019 or condominium association<\/a>:<\/h3>\n
A list of major home improvements and upgrades<\/a>, including dates of installation, costs (include receipts), and permit confirmation (if available):<\/h3>\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/02\/residential-appraisal-kitchen-666x381.png\")
<\/a>How an appraiser approaches value<\/h2>\n
\n<\/b>Depending on the type of property, an appraiser calculates value using one of these methods that the Appraisal Institute describes:<\/p>\n\n
\n
![\"A](\"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2021\/02\/residential-appraisal-woman-on-laptop-666x381.png\")
<\/a>3 common misunderstandings about residential appraisals<\/h2>\n
Misperception #1: An appraisal confirms the sale price.<\/h3>\n
\n<\/b>Because sellers and buyers have emotional attachments to a home, they often assume that an appraisal is wrong if it doesn\u2019t match the listing or contract price<\/a>, the Appraisal Institute says. But an appraisal is only meant to reflect fair market value.<\/p>\nMisperception #2: An appraiser never changes their report.<\/h3>\n
Misperception #3:\u00a0 You can\u2019t talk to the appraiser while they\u2019re at your house.<\/h3>\n