Most common appraisal questions; How much does an appraisal cost?
This is a bit more complicated than the more common appraisal FAQ questions I typically receive. There are different types of appraisals. Depending on the appraisal purpose, (lending, PMI removal, divorce appraisal, estate valuation, etc.) the typical cost for an appraisal is usually between $500 and $800. Many variables are considered in an appraisal assignment such as location (rural properties take more time and therefore cost more), the design of the property, (highly customized homes typically are more difficult to appraise and therefore cost more) and the market area sales activity.
Buying a home isn’t the time to skimp on little things—especially if those little things make a big difference in how much you’d spend to maintain or repair your home in the future, or again, the total cost of ownership of your home. Similarly, it’s important to remember that some things—like square footage, location, and neighborhood, aren’t things that you can easily change later on. A good appraiser will uncover details on not only the home but the market area influence as well.
There are many different methods to appraise a property, and all appraisers are not alike
Is an appraisal necessary?
If you’re taking out a mortgage to purchase a home (or refinancing), your lender will require an appraisal prior to closing. The reason is that the lender needs to make sure, should you default on your loan, that they’ll be able to sell the home for approximately the loan value. However, if you’re paying in cash, it’s completely up to you as to whether you need an appraisal. In some cases, it can be a good idea to forego the appraisal. Not only will it save you money, but it can also help your negotiating power. For example, in a multiple offer situation where it’s clear that the home is not overpriced, making your offer not contingent on an appraisal value can improve your chances of your offer being accepted.
Does the appraiser know the price stated in the
Yes, appraisers have a copy of your ratified contract showing the purchase price, and all details contained within the contract and counter-offers, as well as
Most Common Appraisal FAQ: What happens if the appraised amount comes lower than the contract price?
This is the most often asked of all the appraisal questions I receive, and the scariest one for buyers. It’s common to have appraisal issues in a strong sellers’ market where prices are escalating at a fast rate. The reason is that appraisers use comps dating back to five or six months’ history. So even if you were able to compare two identical homes five or six months apart, the more recent appraisal would have a higher price simply due to increased demand over time. If the appraisal comes back too low, the buyer and seller sometimes renegotiate the price and meet in the middle.
If there is no apparent reason for the appraisal value based on market conditions, an ROV (reconsideration of value) can be submitted to the lender to have the data and analysis reconsidered by the appraiser. It is highly recommended to supply supporting data to back up any questioning of the appraisal. If this fails, you should seriously consider hiring another appraiser to evaluate the situation. I have done this many times for my clientele. This is a complex process in that the original appraisal has to be analyzed in detail to determine exactly how it was constructed, and then new research has to be undertaken to analyze the market from a fresh perspective to see if more suitable data might have been available, or if there were errors.
Extra research can take a lot of time, however the changes in value can be large, and therefore this could make the effort worthwhile. A new appraisal carries a lot of weight, whereas the opinion of a real estate agent or a party to the transaction does not carry much weight. For example – if you or I would want to debate a Doctor, we would not be taken too seriously. However, if a different Doctor supplied evidence and a different opinion on a matter, that would be viewed very seriously.
Finding a highly experienced and skilled appraiser can be difficult. Don’t be misled by a lengthy resume. Years of experience, a degree, or a long list of classes taken does not always indicate a skilled appraiser. I recommend talking to the appraiser and asking in-depth questions, such as asking them to describe the most complex appraisals that they have completed. Don’t make the conversation superficial by discussing how many appraisals they have completed, or how long they have been an appraiser. Dig deep for solid answers to difficult questions.
I have worked with outstanding appraisers that were young, and I’ve reviewed poor quality work from appraisers that have been in the business for a long time. Unfortunately, there is no single list of questions that will be a sure fire way to identify an appraiser’s abilities. Like dating – ask questions and keep asking until you are happy (or unhappy) with the answers you get. Listen to your intuition
If an appraiser has been referred to you by a friend, be sure to ask about the appraiser’s results. Too many people refer someone (not just appraisers) based on how nice they acted, or how nicely they dressed and conducted themselves. A home is the largest financial investment of most peoples lives’ and you should be giving serious consideration on who will be valuing it. My personal perspective on how I view
If my home doesn’t appraise for the right price, should I still purchase it?
There’s no correct answer to this appraisal FAQ. When an appraisal comes in low, some buyers question whether they should back out of their contract and find another home. If the appraisal is just one problem in a long list that has developed over the home buying process, it might be a good idea to consider other options. However, appraisals are certainly objective (despite the systematic approach used), and five appraisers might come up with four or five different values. If you have found the perfect home and you’re simply worried about an appraisal discrepancy, I would not let this one thing derail your purchase. I have always been of the opinion that it is better to overpay for something that is quality than to save money by buying something inferior, or that you don’t really want.
I have appraised many homes in which I thought were priced too high, although the buyers were ecstatic and more than willing to pay the extra cost for a special home. Everyone has to weigh the features and benefits for themselves. I have a friend whose home backs to a golf course. He could have saved a lot of money by buying the exact same style of a
How do seller concessions affect an appraisal?
This is a very good appraisal FAQ. The appraisal value needs to be the same price or higher than the purchase price in your contract. Often, buyers ask the seller to pay some of their closing costs, and this concession is included in that purchase price. For example, let’s say that the buyer and seller agree to a purchase price of $550,000 and that the seller will pay $5,000 of the buyer’s closing costs (netting the seller $545,000). The appraisal comes in at $546,000 which is less than the purchase price. In this case, the closing costs are going to make the situation stickier. Without the concessions, the seller might agree to meet in the middle as the fairest outcome. However, I’ve witnessed quite a few times where the seller wants to cut out concessions altogether. Sticking to a $545,00 purchase price would net the same amount. He might view the closing costs as an unnecessary part of the contract, even though the buyers are relying on those concessions in order to be able to afford their closing costs.
What happens if the appraisal price comes in higher than the contract sale price?
This means that your home might actually be worth more than what you’re paying for it! Sometimes buyers worry that the seller will find out and want to renegotiate the price for a higher dollar amount. However, since you’re paying for the appraisal, there’s no reason to ever share the results with the seller in the instance that you get a higher appraisal price than expected. This information is considered confidential and should not be shared with the seller or their real estate agent.
Real Estate Reference
If you need a highly qualified real estate agent, I have also been a real estate agent since 2007. My appraisal experience and insight is, of course, an added bonus for my clientele. I am happy to answer any real estate or common appraisal questions anytime. Here is my website for more info; https://therealdealhomes.com/