9 Pro Tips (What Else to Say)

There are many reasons to get an evaluation. A seller may want to know the value of their home in order to refinance an existing mortgage or sell their home.

A home appraisal is a professional opinion, in the form of a report, that provides a market value for a home. The appraised value is determined by the home’s location, condition and amenities.

Unfortunately, it’s less a science and more an art – and there are fewer evaluations.

Why is evaluation important?

A conventional mortgage won’t go through without a home appraisal – and if the home doesn’t appraise, that’s the end of the line for the transaction. This is called valuation contingency. Unless the property owner can prove an error in the appraisal process, the appraiser’s mind is unlikely to be blown. The house will not sell… at least not under the initial terms negotiated.

The appraiser does not use the sales price to determine their valuation. They use a complex combination of data sources to come up with a price they feel is fair.

A seller’s market can lead to an overestimated valuation. Bidding wars may drive the price higher than recent sales — but buyers may be willing to forgive the valuation contingency. In that case, they are responsible for covering the “assessment gap,” or the difference between the appraised value and the asking price.

In a hot housing market, sellers may be less likely to negotiate after a low appraisal. Chances are, someone else will be willing to pay the difference in cash. In a buyers’ market, there may be more room to fall into a happy medium.

Property owners can prevent undervaluations from happening by preparing ahead of time documents that portray the property in the best light. A list of improvements, friendly comps, and a home improvement cheat sheet go a long way.

due to low valuation

Appraisals come together through research, thoughtful analysis and the appraiser’s in-person home inspection.

Once the appraiser has inspected the home and compared it to recently sold properties, they will write a report estimating the value of the home. The report will include what specific addresses were used to value the home for recent sales, along with a description of the actual subject property, a map marking the home’s location, a photo of the property, and current real estate. General market condition of the property.

One of the reasons for a low appraisal is if the home doesn’t appear to be well maintained. Therefore it is very important to ensure that both the outside and inside of the property look good (i.e. clean and well maintained).

Market conditions can affect valuation. This can be affected by the current season—in the summer, more people are searching for homes and making offers. The opposite can happen during winter. Perhaps it is a “hot market” in which there are more buyers than sellers. It could also be a lack of comparable sales, or “comps,” in the area that made it difficult for the appraiser to judge the property’s value. Compasses should be similar in location, size and style-And They must have sold recently.

(Want to dig into the nitty-gritty? The National Association of Realtors publishes A Complete Guide to Understanding Residential Appraisals.)

Preparing to fight undervaluation

Appraisers are human and make mistakes just like everyone else. If the valuation of a property is much lower than expected, the results can be challenged.

double-check figures

The first thing to do is check to make sure the property figures are accurate. Did the appraiser include all bedrooms and bathrooms? Is square footage correct? Did they forget the basement or misremember the lot size? If there is an error, provide evidence to the appraiser and ask that they re-appraise the property based on the additional information provided.

If the home’s appraisal is slightly less than you expected, your chances of a successful appeal are not very good. However, you can certainly ask the appraiser to re-evaluate the property. Having comparable qualities to share can also help your cause.

know the neighborhood

Even if the appraiser is local, they may not be familiar with the neighborhood and the property. Keep in mind that school districts can change valuations significantly. If the property is located in a better school district, make sure the appraiser knows that – and includes it in the appraisal.

Check out comparable properties

MLS listings on recently sold properties don’t always tell the whole story. If the appraiser doesn’t know the backstory of the compass and knocks down the appraised value, the property owner needs to make sure the appraiser understands the reason the home sold at such a low price. Remember that house that sold for $45,000 less? Tell the appraiser.

Furthermore, comparable properties must be truly comparable: in the same neighborhood and sold recently. It’s easy to mistype the zip code and get a completely different location. Being just a mile away can make a huge difference in valuation.

what to say in your assessment challenge

Write your ideas in a logical manner that the lender and appraiser can easily understand. Here’s what else to keep in mind:

• leave the novel: Don’t write one.
• filter yourself: Put the name calling and finger pointing aside.
• provide specialized support: Be specific about why the value opinion differs from what was rated. Focus on critiquing the meat of the evaluation- their comp selection and price adjustments.
• find new compass: Supply one or two other sales for the appraiser to consider. Compass should be truly competitive – not located in an area twice the size or better. Would a buyer consider purchasing comps as a replacement for the subject property if comps were still on the market? That’s what competitive means.
• to be humble: You may be right, but you may also be wrong.
• use bullet points: Organize your thoughts into five to 10 specific bullet points that the appraiser and lender can easily digest. Avoid long paragraphs and emotional points devoid of logic and specific data.
• Ask questions: After presenting a point, ask the appraiser to explain why certain adjustments were or were not made. For example, “Comp 2 is located next to a gas station, but no adjustment was given. This could be a clerical error on the appraiser’s part. Why didn’t the appraiser adjust for the adverse location?”
• no pressure: Remember not to push for a higher price—or even suggest a lower price. Stick to the facts and try to let the market speak for itself. Let the appraiser reconsider the value.

Here’s our recommended opening paragraph:

After reviewing the evaluation for [address] By [appraiser], we would like to request further clarification and investigation by the appraiser. We would like to ask for reconsideration of the price based on the following points:

And the recommended closing paragraph:

We would kindly ask the appraiser to take a second look at the above information as it pertains to the data and adjustments in the appraisal report. We appreciate your time and consideration, and please let us know if you have any more questions.

Tips for Getting a High Evaluation

Did the lender agree to send a new appraiser? Get the most out of their trip by being proactive Earlier Evaluation. Here are six ways to do a better evaluation for a second evaluation.

1. Ask if they are local

When the appraiser calls to make an appointment, ask if they are local. Real estate is local, and an out-of-town appraiser may not be as familiar with the local real estate market.

Your home should be appraised relative to its location, not the appraiser’s local market 60 miles away.

Unfortunately, requests for specific appraisers are no longer allowed, thanks to all that fraud around 2005-2007.

Today, lenders select appraisers by sending an email to all appraisers on their list. The appraiser who receives the appraisal presses the “Accept” button the fastest And who agrees to the fee the lender is willing to pay.

The current paradigm is: Which is fastest and cheapest?

“If you get an appraiser out of the area, you can try asking for another appraiser closer to your area, but the expert panels I’ve been told almost never work,” recommends California Certified General Real Estate Appraiser John Carlson with JCCREA.

The lender will have to send another email blast in the hopes that a local appraiser will hit the accept button first. Carlson continued, “If a borrower gets an appraiser from outside the area it makes it even more important to know your market better than the appraiser is from outside.”

2. clean up

The appraiser will spend a short amount of time doing the appraisal – perhaps an hour at most. The house needs to be prepared as if it is to show off with clutter hidden and spotless floors. It helps if the whole house smells good.

This isn’t technically supposed to help with a home’s valuation, but the appraiser will notice if the home is a disaster. They shouldn’t walk into the property and their first impression should be, “What a dump!”

If the property is rented, ask the tenants to keep everything as clean as possible.

For a property that is not tenant-occupied, the only thing you must do differently to show it is habitable. The homeowner must be at home when the home appraisal takes place in case the appraiser has questions.

3. Look outside too!

The last thing any property owner wants is for the appraiser to think their home is gross before walking in the door.

The exterior of the house should be neat and clean. If the assessment occurs during the grass growing season, mow the lawn and clean up dead leaves or plants. During the winter, shovel and walk the driveway. Pick up anything strewn around, such as toys, trash, and debris.

4. Make a list of improvements

List any significant improvements made to the property. what was done? How much was spent? When was the reform done? Understand what features make your property better than the comp.

This list can help the appraiser understand the scope of work and encourage them to appraise more than the most recent purchase price.

5. Create a Cheat Sheet

Measure the rooms before the home appraisal and have a sheet ready to give to the appraiser. They will most likely still take their measurements, but having a page with information can help them make sure they don’t miss a room.

The property owner definitely needs to get an overview of the entire house highlighting the positives. No feature is too small to mention, and some upgrades may not be readily apparent. Who can tell by looking at the walls if the plumbing or electrical has been upgraded? Tell the appraiser everything important.

6. Explain Compass

The appraiser needs to know about comparable properties (aka comps) that have recently sold and that are currently on the market. This helps them get a feel for what and how much is selling before and after the rehab.

Make a list of compasses from their neighborhood which they can share or they can take the help of their real estate agent.

The appraiser will not be able to see the sold homes in the listing for what they appear to be. They won’t know if the house was actually covered in cheap carpet or smells like cats.

Be prepared to explain how your home compares to every property that has sold recently – especially one that sold for less. Sometimes homes have issues that are not disclosed on the MLS. Undiagnosed sewer issues may cause a home to list for under $45,000. In those cases, the buyers uncovered the issues before closing, but the sewer problems were not advertised on the MLS. The appraiser will not know anything not listed on the MLS unless you tell them.

Sharing the compass with the appraiser can help them make an informed decision and hopefully appraise the property at its true value.

A low appraisal may prevent your lender from funding your mortgage – but it shouldn’t be the end of the road. Follow these smart tips for more valuation.

Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.