What You Need to Know About Appraisals

What You Need to Know About Appraisals

1. An appraisal is not an exact science

An appraisal is an opinion of value based on how the homes features stack up against those of similar homes recently sold in the area.  One appraiser may factor in a recent sale, another may consider that sale too "old" or the home too different or too far away to be a good comparison.  This can result in differences between the values two separate appraisers set for your home.

2.  Appraisals have different purposes

If the appraisal is being used by a lender giving a loan on the home, the appraised value will be different than if it's an appraisal for a refinance.  The price you paid for the house has almost no bearing on the value an appraiser will place on the property.

An appraisal being used to figure out how much to insure your home for or to determine property taxes may rely on other factors and arrive at different values.  An appraisal for a home loan evaluates today's market value, an appraisal for insurance purposes calculates what it would cost to rebuild your home at today's building material and labor costs, and that can result in two very different numbers.

Appraisals are also different that CMAs, or "competitive market analyses".  In a CMA, a real estate agent relies on market expertise to estimate what your home will sell for in a specific time period.  The price your home may sell for in 30 days may be a different price than your home will sell for in 120 days.  Because real estate agents are not bound by the same rules as appraisers, there can be variations between CMAs and appraisals on the same home..

3.  An appraisal is a snapshot

Home prices shift, and appraised values will shift with those market changes.  Your home may be appraised at $150,000 today, but in 2 months when you refi or list it for sale , the appraised value could be lower or higher, depending on how your market has performed.

4.  Appraisals do not factor in your personal issues

You may have a reason you have to sell immediately, such as a job loss or transfer, which can affect the amount of money you will accept to complete the transaction in your time frame.  An appraisal does not consider those personal factors.

5.  Cost does not equal value

The best way to understand this point is this: Is an improvement or upgrade something you would have done JUST to sell the house?  Consider a swimmig pool that costs $50,000.  If a homeowner puts a pool in, the simply won't recover the $50,000 cost if they have to sell the next year.  They will have enjoyed the pool no doubt!

6.  You can ask for a second opinion

If your home appraisal comes back at a value you consider too low, you can request that a second appraisal be performed by a different appraiser.  You, or the potential buyers, if they've requested the appraisal, will have to pay for the second appraisal, but it may be worth it to keep the sale from collapsing from a faulty appraisal.  On the other hand, the appraisal may be accurate, and you may need to adjust your pricing or the size of the loan you are refinancing. 

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Contact Information

Photo of Colleen Lawler & The IrvineTeam Real Estate
Colleen Lawler & The IrvineTeam
Coldwell Banker Gundaker
111 Chesterfield Towne Centre
Chesterfield MO 63005
Office: 636-391-2100
Toll Free: 800-791-3276
Fax: 636-536-3018