As REALTORS, we do not “appraise” property values. We work in terms of market value. However, the appraisal value typically plays a part in the sale of Real Estate. Knowing when and why to have an appraisal; what to do during an appraisal; and debunking some of the myths will help prepare you for what is in store.
There are several reasons to have an appraisal. One is a pre-sale appraisal. The appraiser will establish value and can offer suggestions to a seller regarding updates or remodeling in an effort to get the seller the most out of their sale.
While estate planning and liquidation may use appraisal information as a guideline; divorce, property tax challenges and removal of Private Mortgage Insurance (PMI) will require an appraisal. Tax challenges are tough, but mostly because homeowners are not armed with valid information. On the adverse, once your principal pay down on your mortgage dips below 80% of the market value of your home, your PMI insurance should be removed from your loan.
The most common reason for an appraisal is during the sale of the property. If you are selling and a potential buyer is financing the purchase, there will be an appraisal. Sometimes even cash buyers will want an appraisal. The purpose of the appraisal is to ensure the seller is not “giving away the farm” and the buyer is not over-paying for the property. The appraiser finds the balance between the two parties. With that being said, there are some things a seller can do to help facilitate a smooth appraisal.
A) Provide: a copy of the most recent tax bill, HOA dues and set up amounts, any maintenance agreements for shared roads or equipment and a “brag” list. The list would include any recent major improvements/upgrades, the date done, approximate cost and a copy of the permit. This is not to be confused with cosmetic changes. Think more energy efficient appliances, windows, roof etc. or additions. You should also let the appraiser know if there are any easements or encroachments associated with the property.
B) An appraiser will need access to the entire property, including the attic and crawlspace. Make sure the entrances are not blocked. Also, there should be no locked doors or rooms. Period. Allow full access to the property.
C) Fix it. Repair any leaking faucets, squeaky doors, loose or cracked trim or windows and replace any thing that is missing, including light bulbs and windows screens. If a buyer is FHA or VA financed, you will also need to be sure that handrails on all stairs are installed and secure, there is no presence of Lead Based Paint, smoke detectors are correctly installed on all levels, trees and shrubs are not encroaching on the foundation or roof line and there are no “trip hazards” on the property.
I’ve often heard consumers say “The assessed value is the same as appraised value or I know what my home is worth, so we don’t need an appraisal.” Most areas try to parallel the assessed value vs. appraised value, but there are occasions when the Assessor is unaware of any of the interior improvements. Additionally, unless you are an appraiser, you likely equate what you paid for the property or upgraded in the property to what it is worth. This is not the case. Value is determined by product and its condition, location and market trends. So whether you are buying or selling, an appraisal is typically the most current and fair representation of the property, as the appraiser has no vested interest in the outcome of the appraisal.
I’ve also heard “We had an appraisal two years ago, so a new one is not necessary or I paid for the appraisal, so I own it.” Typically, an appraisal is only good for 90 days. Also, if an appraisal is done during the financed purchase of the property, then the appraisal is owned by the lender. Regardless of who paid for it. The lender is, however, required to provide a copy to the consumer upon written request.
If you have an appraisal done and the results seem to interfere with the sale of the property, don’t panic. Please know that whether you are the Seller or Buyer, you have options. Talk with your REALTOR to assess the next steps and make a plan. You may be surprised to find out that you can still have a successful closing.
Crista Martin, Associate Broker, ABR, GRI, e-PRO
208.577.7157
CMartin@atova.com