Almost every financed transaction will need an appraisal. But what is an appraisal, and why the hype surrounding it? The appraisal is a process in which an appraiser gives their opinion of value in the form of a written report. This report, the appraisal report, is sent to the lender.
If the buyer is willing to pay the price, isn’t that what the house is worth? Not necessarily. Appraisers are looking at what the house is worth to a “typical buyer”, defined as the majority of buyers in the current market looking out for their own best interest in the purchase.
So what is the value?
It might be easier to give you an example of what isn’t a typical buyer:
- The house next door from the elderly mother comes up for sale and the daughter wants to buy it and live there.
- Joe’s childhood home comes up for sale and he has many memories there. He wants to raise his children in the house he grew up in.
These are examples where the buyers may be willing to pay a different amount than other buyers due to their unique circumstances.
The lender is looking out for their own best interest. They want to verify that the loan they are offering on this house is in line with the value of the house to the typical buyer.
So how do you work with appraisers?
We know you can provide information to the appraiser such as the contract and all addenda, a boundary survey, spec sheet of the custom build, upgrade list, and other items. But is the seller prepared for the appraiser? Even if the house is being sold as-is, there are items that appraisers look for and may note in their report. Ultimately, this could lead to an adjustment in the value. If you’re looking for a list of these appraiser “hot’ buttons, you can find it here.
Preparing the house for buyer showings is an important step. Curb appeal, decluttering and staging are all things we discuss with the seller for the buyer’s showings but don’t forget to impress the appraiser as well. Make sure you carry over these suggestions for the appraiser’s visit and you’ll likely have a better outcome.
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