How to Approach an Appraisal

There are many different anxieties that go into getting an appraisal done on your home, investment property, or commercial investment. The reason this happens is the unknown, and it is tough to handle the unknown while working on something that is worth so much. The properties can be worth millions of dollars and for the appraisal to come back lower, or not in the same ballpark as your current thought of the value. This can create bigger challenges within your business and life. Here are some quick approaches to make sure that appraisal is going to come back at a value that was expected as the ARV.

1. 1. Make sure you bring your own comparable properties: This is critical for anyone that is going to sell a house or refi a property. If you are refinancing a property, you’ll need to pull your own market comparable properties for the appraiser. This will not be done by an agent since you are not listing the property and not in escrow.

     As you bring the comparable properties make sure that you are looking at a model       match if not a model match, the property is very close in square feet in living space, square feet in lot size, bed-bath count is similar, and make sure the upgrades on the home is the same as well.

1. 2. If the property is listed, bring all the offers: if you are listed in a high market where all the prices keep going up and they are going up quicker than other homes are selling for at that time you are selling your home. Make sure you bring all the offers, or your agent brings all the offers and what those people were going to pay for the home while it was listed (this includes the current offer). All those offers will show that appraiser that the house was very desirable, and a lot of people wanted the home for a high price.

     This can easily be put together in a list with a spreadsheet, and a folder for the       appraiser, and anything about the offers lined out on the spreadsheet. This is imperative to do to show that the home was going to sell for more either way, does not matter this offer (in escrow) or another offer (that is in the packet).

1. 3. Take appraisal contingency out on the offer: this is one to do while being within negotiations with the buyer(s); however, this is still something that needs to be a consideration when we are working as a real estate professional or investor. It really helps to have this out of the agreement so that there is no issue.

1. 4. Bring a spreadsheet of remodel expenses: the appraiser takes note of all the upgrades but will not know how much you spend on upgrades till you show them how much you spend. They will put an estimated amount they think, it’s your job to direct them to what you did spend, or your client spent on the upgrades. It helps them with justification on their report on the price when all the other homes were not within the same ballpark as the price, they are giving your clients home. Make sure the items are labeled in detail.
2. 5. Check the area for other properties that refinanced recently: this is a little harder and will take some due diligence. If you can find a property in the same area that has added on, did upgrades or seems to have done some work that would fit your criteria of work then run a report on the house, see if the house was refinanced recently. If it was then you can contact the person to see what they received on the refinance by skip tracing the home to get the person’s name and number to ask.
3. 6. Make sure the people have 15% down or more: The last battle axe towards winning a purchase with an appraisal challenge is making sure that the person is putting a lot of money down or a good amount down to weather the gap if the appraisal comes in lower than expected. If you have an appraisal that is lower, and the person is purchasing at 3.5% FHA down, that buyer will have trouble coming up with a $10K or larger difference in price between appraised and contract. The person putting 15% or more down will not have this problem of coming up with the difference.

These will bring your client confidence with the information and the protection for that evaluation to be higher than other homes even within the exact area of the property. These appraisers maybe coming from a whole other city, they may be new to the industry, or they may only do condo appraisals and your property is a duplex. Do not leave anything to chance for this home appraisal, make sure that you create your destiny as best as possible.