Whether you are a home buyer or seller, an appraisal is a key part of the whole process. And in many cases, a real estate valuation, an appraisal, seems to be purely arbitrary and overly complicated.
Fundamentally, though, an appraisal is data-driven: it is simply an opinion about a home’s value derived from similar-housing data and neighborhood data. That’s why you need to stop believing these four home appraisal stories in Tx.
1. The Appraiser Works for and is on the Side of the Buyer
A common misconception is that the appraiser works for the buyer and that the valuation, as a result, is skewed in favor of the buyer. While the buyer does, in fact, pay for the home appraisal, the appraiser is actually hired by and works for the lender who owns their work.
It doesn’t matter if the buyer and seller have already reached agreement on a price. Because the buyer’s lender is also making an investment, the lender is concerned the property is worth what the buyer is paying for it. Everyone needs to be on the same page. It is, in fact, a criminal offense for anyone – either buyer or seller – to pressure or coerce an appraiser into coming up with a certain value. Further, appraisers – like agents and inspectors – are answerable to government regulatory agencies.
2. More Amenities and Bigger House Mean Higher Valuation
Upgrades, improvements, many amenities, and lots of square footage don’t necessarily translate into a higher valuation. A home appraisal just isn’t that simple. Haven’t you heard the tale of a swimming pool is not worth half of what you pay for it if that on a resale? But if you are in a area where all the homes have a pool a home without a pool will be dinged for the lack of a pool.
The value of a house is calculated on the basis of sales data for similar homes in the neighborhood. So if a house is more amenity filled and much larger than all others in the neighborhood, then the appraiser won’t have any sales data to work with. In that case, the larger home with all the bells and whistles may not be appraised for what the parties involved think it’s worth. Basically, if surrounding houses (that have been appraised and/or sold) were built on the lot of the house in question, that’s what would be used to determine its appraised value.
So contrary to what you see on tv on these flipper shows just because a seller wants to sell the house for a higher price because it is “nicer than other houses” is not a legitimate cause to increase a price. While upgrades do add value sometimes in neighborhood that value is not justified. A house with granite countertops in a subdivision of formica countertops does not justify a big difference if any in sales price. It will help the home sell faster but not necessarily for any extra money. A subdivision’s values can only be pushed so far.
3. An Appraisal Equals a Home Inspection
Another appraisal story floating around out there is that a home inspection is the same thing as a home appraisal and vice versa. Although both inspectors and appraisers inspect a property to determine its condition, the similarities end there. It’s true they are both safeguards for the buyer and lender, but they have different purposes.
An inspector’s job, primarily, is to detect any and all problems (and even potential problems) with a home. An appraiser’s job, on the other hand, is to determine the objective market value of the same house. Of course, an appraiser will, just like an inspector, note the condition of wiring, plumbing, roof, and so on, but only as a means to arrive at a valuation for the lender.
4. There’s Nothing You Can Do About a Low Home Appraisal in Tx
Also, if you are a seller and the home appraisal comes in much lower than you think it should, you do have recourse. Bear in mind that mistakes do happen – mistakes that can severely jeopardize a potential deal. Yet some appraisals stand such as VA. While you can protest the appraisal it goes back to the appraiser to review your remarks and determine if he made a mistake. Another appraisal can be asked for but it is an additional cost and will take time to process.
In such a case, the homeowner, the seller, can – and should – contact the buyer’s lender and request another appraisal. Before you ever reach that stage, though, you should, according to real estate experts, get an appraisal of your own done before the lender’s appraisal takes place. Keep in mind, too, that federal law stipulates that a copy of the appraisal must be supplied to consumers who submit a written request.