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On The Move... A Blog for Buyers & Sellers!

Golden Plains Realty

Friday, November 29, 2013

Appraisals

This is a big concern that agents, buyers and sellers are sweating out these days. If there is a mortgage involved, this can make or break a deal depending on the outcome. A home’s value is of course influenced by what has transpired around it. If a property appraises for less than what a buyer is paying, then that can trigger a renegotiation or ultimately everyone walking away. As a result in declining home values, a seller may not be in a position to sell the property for a lower appraised value if there is a mortgage to payoff in addition to their closing costs.

On the size of the home, you may be representing that your home is a certain amount of square feet, but in reality it could be less. If you are relying on incorrect information for that – your own measurements, tax records, etc. – there could be some issues here. This can come into play when there has been an unpermitted addition or bathroom, etc. to a home. In some cases, the addition is not heated and cooled. Appraisers only count heated and cooled square footage and a permit for the structure being filed with the county property appraiser’s office would trigger validation/recognition of the additional space. You don’t want a buyer to discover through the course of their appraisal that the home is actually smaller than what was initially represented to them and they may want to readdress the price they are paying because of it.

If you are in a neighborhood where values are all over the place or have had quite a bit of short sale and/or foreclosure activity, etc. consider getting an appraisal before you put your home on the market. It will help give you a baseline from which to work from. Consulting with a highly knowledgeable real estate agent is also important on comparables and they can recommend reputable appraisers that work in your area. Give the appraiser a detailed list of all of the upgrades and improvements you have made to your property but keep in mind that you are never going to get a dollar for dollar return on those items, and some things simply may be nice for a buyer to have with your home but they are not going to constitute a ton of value, if any. Pools for example cost much more to install (around $50K to start) vs. the return you get in an appraisal (an appraiser may only give $15K in value).

Although you will not be able to have a buyer use your appraisal if they are obtaining a mortgage as their lender is going to order one for their benefit, it can help give you some concrete information to work from. You will also have updated measurements of your home’s square footage that you can use in the selling process.