Real estate appraisers are crucial players in many home sales. Usually, the mortgage lender hires the appraiser, after a purchase has been made and a home loan has been requested, to determine the value of the home and whether it makes sense for the lender to provide that much money. As the buyer requests.
As an agent, you need to know what real estate appraisers are looking for when determining the value of a home. In many cases, you should hire a pre-market appraiser to help you determine the asking price.
Pre-registration assessments are increasingly common
Pre-sale valuations give the seller a realistic idea of where their property should be valued when it is put up for sale. They also flag any areas of concern that can be found during a review so the seller can fix those issues upfront.
The appraised value of the house determines the loan amount
“The appraised value of a home will determine how much a buyer can borrow to finance it,” says Michele Lerner, author of Homebuying: Tough Times, First Time, Any Time, based in Washington, DC Lender hires appraiser and the buyer pay the cost. As a sales agent, you can help get your customer the best deal possible and ensure a stress-free review by addressing certain things upfront.
“First,” Lerner said, “make the house available when the commercial real estate appraiser wants. Second, make it look as good on the appraiser as you would on the buyer. If real estate appraisers see deferred maintenance, they’ll wonder what hasn’t been serviced yet. The best agents prepare information on the work the salesperson has done around the house, or the quality of the school district if that is a factor. ”
Karen J. Mann, president of Mann Appraisal (Discovery Bay, Calif.) Notes that disparities between the agreed price and the estimated value of the home can sometimes break the deal. For example, she advises sales agents to have the house appraised early in the process.
Comparisons are a necessity when working with real estate appraisers
“I went to properties and found them to be much more expensive than others in the area, and I would ask the agent, ‘What comparables did you use when you set the price? The agent said, “I don’t need comparables,” but you do. You can’t invent value out of thin air and expect the evaluation to work. If you are asking for a certain price, show the appraiser the documentation to explain why it is justified. ”
“Once the appraiser understands how you came up with the price, they’ll usually know how to work with you. Smart agents hire the nationwide property and appraisal services independently, before listing. Sometimes a salesperson is unrealistic about the price, and in that case, the agent can make the rater the bad guy. We don’t mind: it’s part of the business. ”
Beware of overbids and inflated house values
Mann notes that in today’s seller’s market she sometimes sees an overbidding, and in this case, the lender may not offer as large a loan as the buyer wants. In this case, either the sale price may be negotiated down, the buyer may make a larger deposit, or the transaction may fail. This is why a salesperson should work with an appraiser early in the process.
“Sometimes comparables can paint an unrealistic picture, such as in markets where there has been a lot of foreclosures, which would have led to lower average home prices,” Lerner says. “A few years ago, some appraisers inflated home values, assuming prices continued to rise.”
Note that if real estate appraisers use troubled sales in their report, they should explain why and the lender should agree with their reasoning. So if foreclosures flood the market and essentially establish a new range of market value, then it would be acceptable to use them. If, however, there are perfectly acceptable comparables to use that are not distressed and indicate a higher value, the lender would not accept the use of those comparables.
So, says Lerner, it’s wise to hire an appraiser who knows the local market intimately and understands intangibles such as proximity to public transport or the relative importance of lot size in different markets. “Evaluation is both a science and an art,” she concludes.