Experienced home sellers in Chicago know that reaching a sales agreement with a potential buyer can be just the start of the negotiation process. There are often inspection issues to resolve, among other items.
One particular negotiation point which can present difficulties for both buyers and sellers is when a home’s appraised value falls short of its contracted sales price.
Sometimes, this happens because the home’s price was inflated. Other times, it’s the result of a faulty appraisal.
As a home seller, there are some common appraisal problems of which you should be aware. Here are some of them, and how to seek remedy so that the home sale process remains smooth.
An appraiser will assign your home’s value based on comparable properties and recent sale prices. However, some homes — notably those in foreclosure; sold via short sale; or which were abandoned — sell at a discount as compared to non-distressed properties. An appraiser may want to ignore these types of comparable homes, or make proper valuation adjustments.
Ignored market conditions
The housing market can improve quickly as we’ve seen in some U.S. markets since 2011. Appraisers, though, may not consider a local market’s demand and its rapidly rising prices — especially after the recent downturn from last decade. If an appraiser is not taking into account such information as multiple offer situations, low local inventory, and days on market, your home’s appraised valuation may be affected.
Slow turn-around time
Appraisers operate under strict time guidelines. When an appraisal takes more time than usual, therefore, it’s often the result of the appraiser’s uncertainty on the home’s value. This is a common scenario for unique homes for which comparable properties are scarce. It can also be the case for when an appraiser is unfamiliar with your area. If an appraisal takes an inordinate amount of time to complete, consider asking your REALTOR® to review the figures.
To err is human and appraisers make mistakes occasionally. How you handle those mistakes as a seller can be the difference between a sold home and a canceled contract.