5 Strategies to Win the Appraisal Process
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So that’s first and foremost, let’s assume that we have that gap coverage in there, but maybe it’s only $5,000. So we still have to be aware of the fact that the appraiser has to come through and conclude that the value is in alignment with the purchase price. So while we can’t control appraiser’s decision, we can do some things that will certainly help you win and put your home in its best light.
I’m going to talk to you about the appraisal process, specifically five strategies so that you can win and not lose in the appraisal process. I’m going to let you know what appraisal is and how you can navigate through that process. Once you have your home sold, there are several things that happen between the time you have an offer and the time you close, and the appraisal is one of those.
So let’s get it started. Listen, in a hot real estate market there are oftentimes that appraisals do not come in at the purchase price, meaning the home sells for this price, and the appraisal comes in here. In fact, 27% of all failed contracts as of July, 2021, just a couple months ago, were the result of failed appraisals, or low appraisals. And 14% of these resulted in terminated contracts. So we have to be aware of the fact that just because the home sold for that amount, a buyer and a seller have agreed on a price, we still have the appraisal process with finance sales. With cash sales there aren’t appraisals and no problem there, but just because the buyer and seller agree on that it doesn’t mean the bank will ultimately lend on that. And that’s the whole point of the appraisal.
So what’s an appraisal? An appraisal, as I just mentioned, is the process by which the bank validates the sales price through the appraisal process. They want to know is the money that we’re lending on the home in alignment with sales in the area, so that they know that their asset is protected should the market correct itself they don’t want to be upside down. They’re fine with you being upside down, they’re actually not, but you understand the point. So you got to make sure their assets protected.
So what does an appraisal include? The appraiser that comes out to the home is technically hired by the bank but paid for by the buyer, or the lender, the person that’s buying the house. They include things such as home structure, size and condition, external factors, including the neighborhood setting and lot size. They include additions such as patios, decks, or anything of value in the exterior of the home. And finally, other factors like market conditions. What type of market are we in? Are we in an improving market or are we in a declining market like we were in west Michigan or all over the country from right around 2007 to about 2010, and sometimes 2012.
So here’s what they don’t account for though, they don’t account for decor or movable items. So don’t worry about having to go out and buy new furniture or worry about the paintings on the wall or things like that. Those are things they can’t account for. At least they can’t quantify for those, and we’ll talk about that in a second. So here’s what we recommend given the state of the market when the offer is negotiated, your agent should do an effective job if there are multiple offers in making sure that the one that is accepted should have what’s called appraisal gap. It’s appraisal gap coverage. This is the buyer is agreeing to shore up the gap between the appraisal value and the purchase price should there be one.
So here are the five things that you can do to win an appraisal process. Number one, have your agent prepare what’s called an appraisal package. This appraisal package includes a report with comparables. These are things that you can put right on the table, right on the countertop on neighborhood information, inspection reports. This gives that appraiser really what they need to see. If those comparables were done recently by a real estate professional, they might just take a look at those and say, okay, that makes my job a lot easier. There’s one thing. Number two is, deep clean the inside of your home. It goes without saying, but really sometimes we see where that hasn’t been done, and unfortunately, fortunately the appraiser is human at after all, and they can get a certain sense about the home, which might impact their ability to really put the best foot forward with value.
Third is, secure your pets. Its basic courtesy, and secondly, it allows that appraiser to navigate freely throughout the home and not miss any areas as a result of an unruly pet. Number four, same thing as the inside, do it outside. Spend an afternoon raking, cleaning up the exterior, cleaning up the landscape beds and making sure that everything is tidy on the outside. And finally, touch up paint on the outside of your home as well, and any interior walls. Now, by the way, this stuff should be done before you put your home on the market in so that you’re accomplishing many things. It’ll help your home sell for more money, it’ll help the buyer fall in love with the home, being that they’ll pay more money for the property. And finally, as we’re talking about here, these five steps will help you navigate through the appraisal process.
This is something that we’re doing every day at Yoder Real Estate. We help our sellers get the most amount of money in the shortest amount time, with the least amount of hassle, and this is one of the ways that we’re doing that. If you’d like to know more, reach out to us on our website, yoderrealestate.com. You can connect with us online, ask us questions and even give us a call if you’d like us to walk you through the process. And by the way, here we are in the fall of 2021, best time to get a home in the market is when the competition is low, that’s right now. Reach out to us if you’d like to know your home’s value and we’re here to help.