The housing market in the United States has certainly shown signs of improvement since the market crash. Supply in aggregate has been decreasing, with an uptick in sales prices evident in most metropolitan areas. However, there are still some issues that are slowing or impeding progress to a full recovery. Combined with new guidelines for financing, under market appraisals have weighted down the rate of price increases. Given that bank financing is subject to certain ratios based on appraised value, financing for purchases is still proving harder to arrange and obtain. Lack of financing options, in turn affects sales momentum.
So, what can buyers and sellers do to to make the best out of a possible poor appraisal? Here are a couple tips:
1) Be realistic in expectations. Just because prices are improving doesn’t mean that prices are back to pre-market-crash levels yet.
2) Do your market research and know what comparable properties are selling for both in your metropolitan statistical area, and the neighborhood in which you live. This way you have a realistic competitive set to compare to valuation in your appraisal.
3) Be present for the appraisal. Sellers who attend the appraisal are often able to draw attention to improvements that an appraiser may miss in their evaluation.
4) Make sure you review the final appraisal report to check for errors, omissions and use of inferior properties as comparable properties in the appraiser’s market survey.
Given that most sales contracts allow for termination due to low appraisals, and finance commitments often hinge on appraised value, it behooves both buyers and sellers to ensure that the appraisal that most adequately represents their subject properties.