Guide to Appraisals

When you represent the Seller:

• When pricing property or accepting offers be sure to advise the Seller about appraisal risk and options if the property does not appraise. ( keep in mind that certain appraisals ie:FHA can stay with the property for 6 months)

  • Option 1 - Lower the price to appraised value

  • Option 2 - Split the difference with the buyer 

  • Option 3 - Decline and move on… ( the buyer would have the option to pay the difference)

  • Dispute the appraisal 

• Take note of any concessions that may affect your seller if the property does not appraise. 

• If we are in an appreciating market, appraisals are more likely to come in under sale price.  Here are some tips to help increase the chances that the property appraises for the sale price

  • Meet the appraiser at the property and…

    • Provide the appraisers with comparable properties that justify the price

    • Bring a list of recent home improvements

    • Verbally let the appraiser know if you had multiple offers on the property and how much they were for.

• Here are general guidelines you can use when adjusting comparable properties.

When you represent the Buyer:

• When making an offer on a property be sure to advise the Buyer about appraisal risk and options if the property does not appraise. ( keep in mind that certain appraisals ie:FHA can stay with the property for 6 months)

  • Option 1 - Request Seller to lower the price to appraised value

  • Option 2 - Split the difference with the Seller

  • Option 3 - Back out of the transaction and find another property

  • Dispute the appraisal  - Here is a template of an Appraisal Dispute Letter 

*** If your buyer really wants the property its in your best interest to make sure the property appraises because if it doesnt the seller might not be able to sell it at the lower price (ie they might not be able to pay off the mortgage or pay the buyer’s closings costs or do the repairs you wanted anymore).  So you might want to meet the appraiser at the property and follow the instructions above about what to do at that meeting.  Make sure you get the ok to access the property on that day and time.

• If you are asking for closing costs - Sometimes a property might appraise for sale price and the amount its short is the same as or very close to the amount the buyer is asking for closing costs.  It is very likely that the listing agent will suggest that the reason it didn't appraise is because we were trying to include the closing costs.  So now the listing agent is going to tell you that the seller is willing to lower the sale price to the appraised value, but the seller is no longer willing to pay the closing costs.  Verify if the credit is “ NEEDED” or “NICE TO HAVE”.