“Low" Appraisal Values
Have you recently refinanced your home and been surprised by the "low" valuation you received for your home? Has a neighbor tried to sell their home, only to have the deal fall-apart when the appraised value turned out to be less than the sale price? Decreased home values are only part of the story.
In 2009, new appraisal laws took effect under the Home Valuation Code of Conduct (HVCC). The intent of the law was to prevent "undue influence" from third parties (such as mortgage companies) from affecting appraised values. However, several unintended consequences of this law have also arisen, including:
- slower turn-around time for appraisals;
- less experienced appraisers; and,
- appraisers unfamiliar with the local area making less accurate appraisals.
As a seller, you should know that virtually all sales agreements in today’s competitive market include an appraisal contingency clause. This clause may be a required part of the buyer’s mortgage commitment, or (if the buyer is paying cash or has a down payment in excess of 20%) this clause may be included as an addendum to the Agreement. Regardless, the appraisal clause is a reality in today’s marketplace. Setting your home price realistically and based on marketplace comparables will help ensure a successful appraisal, and therefore, a successful transaction for you as a seller. Before listing your home for sale I will prepare a comprehensive competitive market analysis for this purpose. Based on my knowledge and experience in the local real estate market I will give you an honest assessment of your home’s value. I will not “buy” your listing by agreeing to an artificially high selling price: that is a waste of your time and mine.
How can problems be avoided? Despite a common misperception in the industry, there is nothing in the law that prevents real estate agents from sharing comparables with appraisers. This is a practice I follow and have found effective in avoiding problems. In fact, I have a 100% success rate in home sales appraisals: Not a single home I have sold – as either a buyer or seller representative - has appraised for less than the full sales price.