Do you have to get a home value appraisal?

Working with the Value

It's no secret that the huge number of overvalued properties at the end of the 2000s led to out-of-whack housing prices. Values are coming painfully back into alignment with market realities, but this process is proving to be a long one, requiring patience and creativity from those who need to sell without waiting.

A December 2010 overhaul of practices and oversight provides updates to the home appraisal process that looks to protect home buyers and sellers. With involvement from organizations like the Federal Reserve and Federal Deposit Insurance Corporation, the "Interagency Appraisal and Evaluation Guidelines" frame ongoing steps and responsibilities for ensuring that the practice of real estate appraisal and loan awarding is detailed and transparent [source: Federal Reserve]. These guidelines continue to endorse the longstanding Uniform Standards of Professional Appraisal Practice (USPAP) and educational requirements of the Appraisal Standards Board (ASB), and they publish a summary of what an appraisal should generally include as a minimum. Looking into the USPAP, ASB and having some familiarity with the new guidelines is a good idea when the home appraisal process gets underway.

Appraisers use comparative studies of homes that have sold in the vicinity of your own to determine what the market looks like. This Comparative Market Analysis (CMA) ideally has a sampling of properties very similar to your own. Unfortunately, this value is not so easy to adjust upward or downward because it comes from actual sales numbers. However, some argue that high rates of short-selling or foreclosures reflect poorly on "fair" market value, and sellers are being encouraged to keep an eye on the "comps," or like homes, for those they know have sold at low prices due to the financial needs of the sellers [source: Hoak]. It is becoming more common to ask for another look from the appraiser, and maybe even a second opinion.

If you're close to getting an appraisal for the price you had in mind, any number of improvements can raise you up after the comps come in. While it may not be worth it to start extensive rehabs or upgrades before seeing how much value is already lost through market forces, often a few hundred to a few thousand dollars worth of improvements can bring a value in line with a price a bank will agree to on behalf of a buyer.

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