Lenders hire appraisers, who are third-party, certified and/or licensed contractors. Make sure your lender hires a certified appraiser who works with multiple lenders. You may also request that the appraiser be knowledgable on the area where you live. The buyer typically pays the appraisal fee (a few hundred dollars) upon closing as a part of mortgage costs. An appraisal takes a few hours, and the report is given to the lender in about a week. The lender is required to share the report with the buyer.
Things get more complicated when the appraised value is less than the home’s asking price. Buyers cannot finance the amount that they expected to. Sellers should obtain a copy of the report and make the repairs that they can before requesting a second appraisal. Low appraisals are more common in a poor housing market due to the lack of recent comparable area home sales.
How To Avoid a Low Appraisal
Before the appraisal, spruce up your home the best you can so that its overall condition improves. This includes repairing or replacing soiled carpeting, painting over marks on the walls, mowing the lawn and pulling weeds, and removing peeling paint (since loans insured by the government require peeling paint to be removed in homes before 1978). Fix leaky faucets, cracked windows, missing handrails and structural damage. Focus on updates that will earn a high ROI: paint, carpet, light and plumbing fixtures. You want the home’s effective age—the age an appraiser can assign to a home after considering its updates and condition—to be as low as possible. This affects what homes yours will be compared to. Finally, put any pets away before the appraiser arrives and make sure your home is clean and comfortable enough for the appraiser to do his/her work.
Inform your appraiser of recent short sales or foreclosures that may affect the comps. Let the appraiser know if a nearby home was sold by owner, since this is likely not reflected in the Multiple Listing Service (MLS) from which appraisers draw their information. Also let the appraiser know of any improvements you’ve made to your home in the last 15 years. Keep a list of each update and its approximate cost (from a new roof or insulation to a bathtub that has been resealed). Additional useful information includes the property's best features and a sketch indicating square footages. If improvements have been made to the area where you live (a new playground or grocery store, for example), or if it has been declared a historic or landmark district, notify your appraiser. Click here for a sample appraisal form.