When buying or selling real estate if a loan is needed an appraisal will likely be required. Working with an appraiser can be a great or very bad experience depending on the appraiser and what side of the transaction you’re on whether buyer or seller. Unfortunately after a purchase offer is accepted by the seller the deal is not done. There are many caveats to a real estate transaction.
An appraisers job is to look at other comparable properties in your neighborhood and establish a value based on what other similar properties have sold for. After all, value is what someone will actually pay for it right? Not exactly, unfortunately that’s not 100% the case when an appraiser is involved. Let’s say you’re a seller and you have a property that you’ve accepted an offer on for $100,000, a buyer with no mortgage loan and no need to get a lender involved thus probably no appraiser may likely end up purchasing that property for $100,000. Now walks in the lender for the buyer that says we want to know the value of the home and when the appraiser does their appraisal that same property that is under contract for $100,000 might be valued the same, higher or lower depending on the other comparable properties the appraiser locates to establish your value.
Working with an Appraiser
To really mix things up if another appraisal is done on that same property it might actually even have a different value since value is defined based on the comparable of the similar surrounding properties that have sold. It’s easy to value properties that are the same in the same area. For instance a home that is 3 bedrooms and 2 bathrooms that is 1,000 square foot built in 2000 sells for $500,000, along comes a seller with the same floor plan, same neighborhood, the same everything and wants to sell their property for $1 million, it’s probably not going to happen since his buddy down the street sold his house for less. Now take that same house and relocate it to a different area and then value changes again. Appraisers really have the ability to seal the deal or destroy it and unfortunately their experience maybe the cause of your fate in the transaction.
To better prepare yourself on what’s needed for buyers using a lender and requiring a loan, check out our article Home Purchase Mortgage Checklist.
Sometimes adjustments are needed on a property to establish its value. Let’s say the same 3 bedroom and 2 bathroom, 1,000 square foot home is surrounded by all other homes that have better layouts, larger or smaller in size or not the same area then adjustments must be made to establish value. This is where it gets tricky because as previously mentioned nobody can really argue a property’s value if multiple homes have sold and their all the same but when adjustments come in to play is when things get interesting. Unfortunately there is no method to go by to establish those adjustments and so that’s when things get a little sideways.