Whether buying or selling, appraisals are integral part of the process. If an appraisal is inaccurate, it can cost your client thousands of dollars, which is why I’m always in attendance when an appraiser is on-site.
For those who need a refresher, the very definition of an appraisal is an estimation of a home’s current market value. A licensed appraiser completes this estimation, which is calculated by comparing the recent sales of homes in the area as to the property that is being appraised. This is required by mortgage lenders to be sure that the money they are lending to a new homeowner or a current homeowner is a fair amount for the home.
An appraisal can also be a great negotiation tool when it’s time to finalize the purchase price.
I was recently sitting at a house with the appraiser, and it made me think: How many listing agents go to the appraisal? And is there a benefit? Well, for those of you who are unsure, the answer is yes. Here’s why.
1. Who else knows the property better than the listing agent?
Appraisers are busy people, and they might gloss over the details. It always seems that appraisers have many homes to review and not much time to do it in.
If the listing agent is in attendance, at the very least he or she can point out the various updates, features and highlights that an appraiser might not easily catch upon first look.
2. Agents understand the complex factors behind the sale
Why leave the guesswork or homework up to the appraiser? Appraisers are not informed of the complex factors that went into the sale. They rarely know why it sold for the price it did in the first place. That is why having an agent on-site and developing a rapport with the appraiser can come in handy.
A few of the misconceptions that can affect an appraisal include upgrades to the home, activity while it was listed, number of offers, what was wrong with some of the comps if they bring the value down, why a particular comp isn’t a comp and, in some circumstances, reasons for the owners being forced to sell low, as well as any objections the buyers had.
All of these unknowns create a disconnect if not brought to the appraiser’s attention.
3. Appraisals and home values are like a piece of art
Much like appraising art or sculpture at a museum, everyone has a different opinion. And ultimately, it all depends on what a person is willing to pay.
Throughout my career I’ve always said that you should have three different appraisers at a property. If other parties don’t agree, I’ll bring them in. This is important because it shines a light on the purchase price.
For example, if you asked three different appraisers the value of a home they would all come up with different valuations, different comps, and different price points, especially if they did not bring it in at the purchase price value. When a low appraisal comes in on a property, I have routinely seen the second appraiser bring the property appraisal in at value.
In my opinion, agents who don’t attend appraisals are doing a disservice to the property. As a broker-owner, I also encourage my agents to attend home inspections, which are just as important.