Tips for Getting a Fair Appraisal-President's message
Bob and Mary thought they'd found their dream home, especially when they made an offer and the seller accepted it. All the closing preparations appeared to be moving smoothly until the appraisal came back significantly lower than the price they'd offered to pay, thereby jeopardizing their chances of getting financing on that particular property.
The home appraisal is a vital part of both the home buying and mortgage refinance processes, because buyers and lenders need to be assured that the purchase price or loan amount is in line with the home's market value. This helps prevent the buyer from overpaying and protects the lender from loss in case the home goes into foreclosure. However, during the housing boom years, there were reports that appraisers were being unduly influenced to appraise homes for higher than they were worth.
That's why mortgage giants Fannie Mae and Freddie Mac agreed to adopt a Home Valuation Code of Conduct that aimed to create independence in the appraisal process. However, it appears the code has created unintended consequences as well, such as unusually low valuations. In fact, some reports suggest that there has been a greater use of unqualified appraisers since the code was implemented.
Just as an inflated appraisal causes problems, so do lower-than-market valuations. Buyers are unable to get financing for the home they'd like to buy and homeowners are prevented from refinancing their mortgages. Nevertheless, even though Bob and Mary's situation has become more common with the new regulations, there are still things buyers and sellers can do to ensure they get a fair appraisal.
First, make sure the appraiser who is assigned to appraise the home is experienced in appraising similar homes in the area. There have been reports that some appraisers are conducting appraisals outside their geographic areas of expertise, so make sure to do a little background research before the appraisal is conducted.
Second, the homeowner should make sure the home is clean and presentable. The appearance of the house could have some influence on the final number, so prepare the home the same way you would for an open house, suggested Michael H. Evans, of the American Society of Appraisers, in a recent Money Magazine article.
Third, the homeowner should make sure to be available during the appraisal. Prepare a list of the house's attributes that may not be readily apparent to the appraiser. For example, a home sound system or energy-efficient upgrades could add value to the home, but might not be readily noticeable to the appraiser.
Fourth, if the appraisal comes back lower than you expected, carefully review the report. Have your Realtor help you determine if the data used in the report was the best available. Perhaps your Realtor knows of other recently sold comparable homes that might be a closer match to your home. Also be on the lookout for any potential errors. Is the square footage accurate? Is there any part of the analysis that doesn't add up? If you find errors or have additional information, present it to the appraiser. Many appraisers will appreciate and consider the extra information.
Finally, if you believe there are problems with the appraisal, that your appraiser is not addressing, talk to your lender. Or you can report the problems to the Utah Division of Real Estate, which regulates appraisers in Utah.
Determining market value is a difficult task in today's market, so it's a wise idea to provide the appraiser with any information you have that might be helpful. Your Realtor also has unparalleled knowledge of local housing markets and is likely to be a valuable resource as you navigate today's new appraisal landscape.
Published Monday, September 28, 2009 12:19 PM by Chris & Berna Sloan
