Your home is newly listed. You have worked hard to make it show-ready in a hot buyers’ market. Buyers and their agents are scheduling showings at a rapid pace and, as expected, multiple offers come in. With the help of your listing agent, you compare offers and select the most qualified buyer(s) with the highest price. Ready to go to the closing table, right? Not so fast! Well-represented buyers are going to do their own due diligence and request a property appraisal. Bottom line, your home needs to meet or beat the agreed-upon selling price of the property.
You need to sell your home twice!
Appraisals are part and parcel of selling a home. No matter how in love with your home the buyers are, they do not want to overpay. Sellers and their agents need the appraisal to come in at a price that meets or beats the listed price and/or the agreed upon purchase price of the property; and, lenders need to confirm the value to move the loan successfully through the underwriting process. When an appraisal does not meet expectations, it does not necessarily derail the transaction.
There are ways to dispute a low home appraisal.
First, listing agents should request a copy of the appraisal report from the buyer’s real estate agent. Federal Law, through the Consumer Financial Protection Bureau, stipulates appraisal reports go to buyers only; therefore, the sellers and their agent must request a copy. Once received, the report should be reviewed carefully for any errors. Ensure all details in the appraisal match the home because, like everyone, appraisers can and do make mistakes. For example, it is not uncommon for an appraiser to report a room being used as an office or playroom as only that. In reality, this extra room may be able to count as a fifth bedroom; and, an extra bedroom could make the difference in the appraised price reported.
If there are no mistakes in the appraisal report, sellers might want to contact their own lender and request a value appeal.
The seller should be able to substantiate any value appeal with evidence. Evidence includes updated comps on sold properties from their listing agent to “make the case” for the listing price. If there have been improvements or additions to the property, the appropriate permits should also be included in this evidence. Without permits, there is no evidence.
Another consideration is to appeal the “fit or suitability” of the appraiser.
If the appraiser normally works in an area 50-100 miles away from the property, he/she may not be the best person to assess the value of this property, as that appraiser is most likely unfamiliar with the market and neighborhood. In this fast-paced real estate market we are experiencing, it is not uncommon for an appraiser from another area to be assigned to work in areas they are unfamiliar with in an effort to get the appraisal completed in a timely manner. Confirm the appraiser has performed other appraisals in the area.
If all else fails, the seller does have the right to hire a second appraiser to do a valuation on the property at the sellers’ cost. This may or may not impact the final outcome; however, if your agent and you feel your home was priced correctly and have evidence supporting the price is within the market values of your area, having a second opinion cannot do any harm and may make your case.
When selecting a listing agent, hire a professional who knows your market area.
Your agent should be able to help you navigate any issues regarding the sale of your home!