In the current marketplace, a seller has to sell a property three times: to the buyer, to the appraiser, and to the lender. That's because appraisers are more conservative today than at any other time in my 18-year career, and appraisals are gone over with a fine-tooth comb by lenders. That has led us to where we are today, where buyers, sellers, agents, and even appraisers can be anxious about appraisals.
Here's what I now do to prepare myself and my sellers' properties for the appraisal:
I always tell my sellers to prepare the property for the appraisal appointment just as they would for a prospective buyer. This includes:
a) Having the place in showroom condition and hotel-clean. Appraisers are mostly concerned with numbers and condition, but they're human, too. A property which gleams make a good impression on everyone.
b) Leave all the lights on so rooms are bright when they walk in. Again, this makes a much better impression than a dark and gloomy room.
More important than these emotional appeals, I provide the appraiser with reasonable comparable sales (comps) from the past six months which reflect well on the purchase price for the listing. The appraiser isn’t obligated to consider them, but the best way to make sure they won’t look at the comps you’re looking at is to keep them a secret.
When a listing agent has a signed Purchase and Sales Agreement, he has not finished his job. Bill Kuhlman, CRS, who is the broker/owner of Kuhlman Residential explains that even if they buyer is willing to buy at the contract price, the lender's appraiser and underwriter still have to approve the property for collateral.
Appraisers generally look for three comps: one which sold at about the same price as the subject property, one above, and one below. If I can help by providing comps which may contribute to building the case for the sale price, I do that. (Just to be clear, I do this only if I’m representing the seller in a transaction.)
If there is anything remarkable about the market conditions, let the appraiser know. Don’t assume they know everything that’s going on with the market in a particular town or neighborhood at any given time.
I recently showed an appraiser the two filled-up sign-in sheets from the first-and-only open house, and pointed out there were many groups of buyers who did not sign in, which was true. I told him there were three offers on the property in two days, which was also true. I then showed him an MLS printout showing there were only five active condo listings priced between $550,000 and $690,000 available on the market in that town the day of the appraisal.
Many appraisers have already done much of the work on the appraisal before they show up, and some will give you an indication of what to expect by saying something like, “I don’t expect this appraisal to be a problem,” or, “This one might be tough.”
But this appraiser was particularly businesslike. He told me during the appointment that he was tired of arguing with lenders, who now question appraisals and often adjust the final number below the appraiser’s opinion of the market value. He looked me in the eye and said, "If the comps aren't there, I can't help you." Which is as it should be, but many appraisers aren’t as direct as this guy was, especially if they think they might have bad news for you.
At the end of the day, the appraisal on this property matched the purchase price, survived the lender's review, and we closed more than two weeks ago.
FWIW, shortly before we went on the market at the end of March, a popular real estate website’s "Estimate" said the market value for this property was between $410,000 and $525,000, and set the value at $460,000. Even more than two weeks after the closing, it now says the value is $478,800. We closed the deal at $615,000.
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