The Importance of the Appraisal
One step that sellers often overlook in the home selling process is the appraisal. You can hypothetically list your home for any asking price you want (of course that’s not the best strategy), but mortgage lenders will only approve buyers for the amount of the appraisal – and if it falls short of the agreed upon sales price, this could result in the purchase contract getting cancelled, unless you, the owner, are willing to drop the price to the bank’s appraised value. In some cases, the Buyer will come out of pocket for the difference between the bank’s appraisal and the sales price. But don’t count on that, unless it’s truly a Seller’s market.
Understanding the appraisal process will help you to make the right choices when pricing your home, as you’ll want to use the same information the appraiser will – market data, recent sales, comparable homes on the market – to determine the market value of your home.
What Does an Appraisal Involve?
A home appraisal, at its essence, is the process of determining how much a home is worth. An appraisal is required when a Buyer is seeking a mortgage, and is paid for by the Buyer. It’s the bank’s way of determining that its customer is not paying more than a home is worth, since the bank itself is going to be the majority owner of the home until the mortgage is paid off. As a Seller, you have no control over the choice of an appraiser. And here in the Virgin Islands, it is worth noting that appraisers are rather scarce, and therefore it can take days if not weeks before a licensed appraiser is assigned to evaluate a home.
A licensed appraiser looks over the entire property, including the house itself, the land, and any additional structures on the property. Factors that affect the appraisal include:
- Square footage
- Number of bedrooms
- Number of bathrooms
- School district
- Home interior features
- Age of home
- Unique features of the structure/property
- Property views
- Improvements or upgrades
- Swimming pools and landscaping
The Listing Agent’s duty is to meet the appraiser at the Seller’s home, and before the appraisal begins, explain any repairs and improvements the owner has made, and if possible, explain some of the compelling factors that prompted the Buyer to pay the price he/she has agreed to pay. Additionally, this is the time for the Realtor to present the appraiser with comparables supporting the sale price. However, an arm’s length is maintained between Realtors and appraisers and banks. Federal regulations are crafted such that appraisers are distanced from anyone trying to gain favors from an appraiser’s service.
Preparing for an Appraisal
An appraiser is different from an inspector. They are interested in the nuts and bolts of your home; its best features and how it compares to others. Preparing for an appraisal is a lot like staging for an open house.
- Clean the house
- Make repairs – especially to anything that presents a hazard, such as a missing handrail, faulty decking, electrical hazards, etc… The repair issue is especially important if your Buyer is seeking an FHA or VA loan, whose criteria is predicated on a home’s safety.
- Paint the exterior
- Trim landscaping
- Improve curb appeal