Of all the people you'll interact with when buying or selling your house, the appraiser is the one you'll get to know the least. But he'll play one of the most powerful roles in the buying or selling game. What he finds can be the difference in whether or not you'll get the house you want or be able to sell the one you don't. He's typically in and out of the house in under an hour, and he has a specific checklist of items he's looking for. While he may point out things that need to be addressed, for the most part, there probably won't be a ton of interaction.
If you have time to ask the important questions, and he's willing to provide the answers, then you're luckier than most. If he rushes through and mumbles a hasty goodbye on his way out the door, there are probably some things he'd rather you didn't know. Here are 10 that he might be keeping from you.
Back when housing values were skyrocketing and mortgage brokers were increasingly becoming the go-to people for loans, appraisers were commonly pressured to lie about the value of the house. Why? To make sure that the buyer got the loan she wanted and that the sale went through, even if it was more than the house was actually worth. This is becoming less commonplace since banks have started cracking down on loans, but it still happens. You may think this isn't such a bad thing if you really want a certain house and the bank is telling you it costs too much. But what it means in the long run is that you overpaid, so you'll have a hard time selling it unless you or your buyer can come up with the extra cash at closing.
One of the steps in finishing up your home appraisal is for the appraiser to look at comparable homes that have recently sold in your area. If you live in a neighborhood with houses that are similar to yours, and they've been selling for above market value, you've got nothing to worry about. But with the housing crisis of the last few years, there aren't a lot of neighborhoods that have those bragging rights. The housing market can fluctuate depending on many variables, so it's really important that your house is comped using accurate market conditions that specifically apply to your neighborhood. If you know of houses that have sold for close to what you're asking, have this information handy and be sure to give it to the appraiser before she leaves.
Hopefully, you're working with a real estate agent who you know and trust, because it's important to ask her to be with you during the appraisal. Realtors know the business and what appraisers are looking for, and they can help fill in any gaps of information that you wouldn't know to volunteer. Also, they tend to know what's going on in the rest of the neighborhood, so they can tell the appraiser about good comps. They can also come up with a list of foreclosures and short sales in the area and ask the appraiser not to factor them into the comps.
You bought your house as is, with visions of renovations and upgrades that reflect your tastes. Over the years, you installed granite countertops, constructed custom built-ins and bought top of the line appliances. In comes your appraiser. He's breezing right past the sparkling hardwoods and custom cabinetry because he's trying to get through your house as quickly as possible. After all, he has other stops to make. It's up to you to point out everything you've done. Hopefully, you've kept track of all of your upgrades, including how much they cost. Before and after pictures support the cause, so don't be afraid to pull those out.
As a response to inflated appraisals encouraged by mortgage brokers and realtors, Freddie Mac and Fannie Mae instituted a policy requiring Appraisal Management Companies (AMCs) to handle all appraisals for loans they backed. While this solved a problem for the lenders, it's created some problems for sellers. AMCs can hire any appraiser who's licensed in the state, which means they could assign an appraiser to your house who lives hundreds of miles away. If the appraiser isn't familiar with your neighborhood, he may base the value of your house exclusively on comps, resulting in a devaluation of your property. That means no sale any time soon, unless you're ready to lose money.
When your realtor writes your contract, be sure to have him include your right to approve who the buyer uses as a mortgage lender. Some lenders are notorious for purposely underestimating property values, and real estate agents are often familiar with who these are. You can't ask for a certain person to do your appraisal, but you can be specific about that person's competency, and your broker can reject someone she knows isn't right for the job. If working with an AMC, be sure to ask for a senior residential appraiser who has experience specifically in your area. And be sure to put it in writing.
Historically, it's been up to the bank to decide if homeowners get to see an actual copy of their home's appraisal. Yes, you paid for it, but technically, it's owned by the company who ordered it -- typically the lender. They have full discretion about whether or not you get to see it. Irritating much? But if the lender is Fannie or Freddie and you're working with an AMC, lenders are required to provide you with a copy before closing.
The appraiser is going to be at your house in about 20 minutes, and you're already running around like a crazy person. So is it really important to get the dirty laundry out of the overstuffed hampers and sweep up all the dog hair and dust bunnies? Yes, yes, yes! True, your home is appraised based on the square footage, number of rooms and amount of land, so technically, your housekeeping skills don't count. But appraisers are human, and they're bound to be influenced by a big mess. Being valued at the top of the range versus the bottom could be the difference in making the sale.
You know that hole in the wall, where the thing went through the thing and broke the thing? The cracked window pane that you temporarily fixed with duct tape? The back door that the dog scratched up and the crack in the basement door from repeated slamming by your surly teenager? All of the things you've been meaning to get to and have put off again and again? Well, now's the time to get off your duff and get them all fixed. Not only will damage affect your appraisal in a negative way, but if your loan is insured by the Federal Housing Administration (FHA), appraisers are required to report damage to them.
In cases where your appraisal comes in below what you hypothesize to be fair, you don't have to lie down and take it. You can go to the lender and protest it, but you're going to need to be armed with documentation to support your argument. Be sure to include photos and a record of all improvements, as well as comps of other houses that should have been included. Your real estate agent should be able to look at the ones that were used for the appraisal and help you come up with better comps. You can also fork over the cash for your own appraiser and take that with you, if it comes in considerably higher than the first one.
When you can't afford your mortgage and don't want to foreclose, a short sale may seem like a good idea. Find out how short sales work at HowStuffWorks,
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