A real estate deal is a bit like the 100-meter high hurdles at a track meet. Once you go under contract, you’ve got a few barriers to get over before you can cross the finish line and finalize the transaction.
The typical home sale contract has contingencies that allow the buyer to do inspections, check out the HOA, make sure the property is insurable, make sure there are no title defects, get a loan finalized … and so on.
If anything does not check out to their satisfaction, buyers can call off the deal and get their earnest money back and go back to the starting line and run the same gauntlet with another seller.
One of those hurdles in most real estate transactions is the appraisal. The house must appraise for an agreed upon amount or the buyer can back out of the deal. An appraiser must come to the house and see if it is worth the agreed upon value.
How hard can this be? You just open the door, let the appraiser in and let him do his thing, Right?
At times, it can be that simple. In today’s market environment, however, many deals require an appraised value that is pushing the envelope – an amount that might be difficult for an appraiser to justify.
One of our agents recently gave us all a little symposium on how to deal with appraisers when we’ve got those challenging appraisals. She has a formula for improving the odds that the required value can be obtained. Here is a summary:
- Respect: Appraisers are overworked and underpaid. This may be an unpopular perspective, but it’s true. While appraisal fees have gone up over the years, they have not kept pace with inflation. Worse yet, new regulations have inserted middlemen into the appraiser selection process and the middlemen are the cause of most of the fee increase. The appraiser may only get half of the $400 to $500 fee being charged for the appraisal. It takes 6 to 8 hours to do an appraisal – so you do the math on the hourly rate. Let them know how much you appreciate what they are doing.
- Scheduling: One easy way to make life easier for appraisers is to accommodate their schedule. Let them come do the appraisal whenever they want to. They are probably juggling dozens of appointments. Being asked to come earlier or later or on a different day complicates their lives. If they want to come during naps or during your parent’s 50th wedding anniversary, tell them to come on!
- Provide Useful Comps: Appraisers must follow strict rules on selecting “comps”. Comps, or comparable sales, are other houses that sold recently that can be used in an appraisal analysis. While they have usually selected some potential comps, many appraisers are glad to receive information on others … IF THEY FIT THE GUIDELINES and help justify the price. If a seller or agent provides comps that don’t meet the guidelines, they get annoyed. At CHR, we have a fact sheet on what makes for good comps so that we can always provide the right kind of properties to the appraiser.
- Provide Appropriate Details: Appraiser must adjust for differences in value between their comps and the house they are appraising. Again, strict guidelines dictate how they do so. When providing appraisers with suggested comps, it is always helpful to have pictures and notes to highlight any ways in which the comp was inferior to the house being appraised. It may be that the comp had a substandard location or fewer upgrades or other factors that the appraiser can use to justify a higher value on the house being appraised.
Appraisers have a demanding job. Our job is to support them and make their life easier so that we can get the appraised value required to make a transaction successful for the benefit of both the buyer and the seller.
Compliments – Mike Cooke – Colorado Home Realty (c)