Preparing for the Home Appraisal Process
While the entire process of buying a home can be a bit stressful, the home appraisal may be one of the more nerve-wracking parts. Waiting to find out if you’ve offered too high or too little money can be stressful. Your biggest job in the process is to be well-informed about the process, your rights, and what you need to do. Below is a list of tips to help you navigate the home appraisal process.
Am I Protected?
One of the big things for you to know is that you are protected in this process, thanks to guidelines put in place by Fannie Mae and other lenders. They have created a database called “Collateral Underwriter” (CU), where all appraisals must be logged. The system then runs the appraiser’s report through the database of past appraisals and market data to ensure that all findings are accurate. This keeps lenders from pressuring appraiser’s to inflate home prices, which is considered fraud. Beware this also means that to avoid being accused of fraud some appraiser’s will value a home a bit lower than is expected.
What’s the Area Like?
Learn as much as you can about comparable homes in the neighborhood as well as the current market. You should know the current prices, and state of several comparable prices. Look for short sales and foreclosures in the area that could bring values down. Ask your agent to request that a local appraiser be used for the home appraisal process, as they will take these things into consideration and are more likely to know the true value of the homes in the area. While you cannot request specific appraisers you can ask for local, experienced appraisers to compile the report.
An Agent is a Friend
Consider your agent to be a friend and a direct representation of you. That being said, ask your agent to either be present at the home appraisal or to at least contact the appraiser before the report is created. The agent can provide valuable information about recent sales in the area that can help to justify price. Or if they know of any concerning issues that would bring home values down in the area they can inform the appraiser before the report to help you get a more fair appraisal.
Low Appraisals Happen
Take the time to learn about the different reasons that appraisals can come back lower than anticipated, before you dive into this process. Here are a few of those reasons. Home prices are increasing more quickly than the sales figures from six months ago will reflect. The pool or landscaping fails to add value. There aren’t enough comparable homes in the area so homes from less desirable areas are used as comps. Lower value per square foot was given to space below grade, meaning the fully finished basement was not accurately evaluated. You should use your knowledge of these reasons and the area to inform your appraiser of any of these factors which may be unknown to them.
Don’t Skim the Report
Since you have a right to a copy of the report, don’t just skim over the basics. Read every single page completely to make sure there are no errors or omissions. If you notice any you should inform the appraiser right away, as they will need to be corrected, if you’re lucky they could boost the appraisal a bit higher.
The home appraisal can make or break the deal, but they don’t have to be a scary situation if you do your research. Know from the beginning what you can do to help get a better home appraisal. Take the time to learn about the area and how it will impact the report. Last but not least, know that your agent is there to help you understand it all and be your representative in the process.