Home Appraisal and Working with Appraisers

Learn about home appraisal and appraisers

This article is about home appraisal and working with appraisers. As such, home sellers and buyers will learn what home appraisal is and how to work with their appraisers.

What is Home Appraisal?

Home appraisal is an unbiased professional opinion of the value of a house as determined by a licensed appraiser. Note that in Texas, appraisers are licensed by the Texas Appraiser Licensing and Certification Board (TALCB)

When is Home Appraisal Needed?

When buyers buy homes with loan, mortgage lenders require the appraisal of the home to determine its value. However, if paying cash for the home, appraisal is not required but recommended. 

Purpose of Home Appraisal

The purpose of home appraisal is to determine the value of the home to verify that it is not over priced. The amount of loan for the home must be below or equal to the value of the home. For this reason, lenders require appraisal to ensure the house will be a sufficient collateral for the loan.

Who Orders Home Appraisal?

For lender-required appraisals, lender orders for it and is the appraiser’s client. However, home buyers pay for it. Buyer can pay upfront or as part of the closing cost. On the other hand, for cash purchase, buyer orders and pays for the appraisal. 

Home Appraisal Report

On completion of the appraisal, the appraiser prepares a written report. If it is a lender-ordered appraisal, the appraiser sends the report to both the lender and the homebuyer. Otherwise, the appraiser sends the report to the buyer only.

Reading the Appraisal Report

A complete appraisal report contains certain important components. Home buyer or buyer agent should be able to locate and identify these components on the report. Therefore, it is important that buyers and sellers read and understand the appraisal report.

Home Appraised or Not Appraised

When the appraised value is equal to or above the sale price, the house is said to be “appraised”. On the other hand, if the appraised value is below the sale price, the house is “not appraised”. When “not appraised”, lenders will require that sale price be reduced to below or equal to the appraised value. If seller declines to reduce the sale price, buyer has two options. First option is to pay the price difference between the sale price and the appraised value. However, this option requires lender’s approval. Second option is to cancel the contract or use another payment option. Therefore, buyers need to bear their approved loan amount in mind when searching for home. 

How Home Buyers and Sellers Work with Appraisers

On receiving the home appraisal order, the appraiser contacts the home seller or seller’s agent to schedule the appraisal. If they choose to, seller or seller agent may meet the appraiser at the house the day of the appraisal. However, seller or agent is not required to be present at the appraisal, but is recommended.

Presence of seller or agent allows them to answer any questions the appraiser may have about the house or neighborhood. This is also the chance for seller to provide the appraiser any document with information about the house. However, the appraiser should be given the necessary time and space to complete their work. Therefore, it is best for seller to provide the appraiser certain information or items prior to the meeting. This helps seller get the utmost appraisal value and benefits.

Suggested items to Provide Appraiser

Below are the suggested items home seller or buyer may provide the appraiser:

  1. Complete executed contract, including all addenda and amendments. Therefore, seller has to ensure the appraiser has a copy of the contract.
  2. Copy of the house survey. The survey provides lots of information for the appraiser including flood hazard area and encroachments. 
  3. List of improvements seller made to the house.  
  4. Information about multiple offers, if any. How much information to disclose is up to the seller. Thus, copies of all offers or an overview of the offers may help the appraiser in valuation of the house.
  5. Blueprints or Plans: If the house is large or difficult to measure, plans help appraisers get closer to good valuation.
  6. List of a few houses recently sold, and listings in the neighborhood that seller deemed similar to their house. However, since seller may not be able to obtain this item, Seller agent will help in getting it.
  7. Comparative Market Analysis (CMA).
  8. Information about the other homes the buyer looked at or viewed, if available. 
  9. Any special information about the neighborhood, such as amenities.

Seller’s Agent Resources

Finally, seller’s agent may already have some of the above listed items. Therefore, home seller shouldn’t have any problem providing them to the appraiser.

Conclusion

Home sellers and buyers should be familiar with home appraisal before buying or selling a house. Knowledge of appraisal and requirements will help them in handling and managing sales contracts and other real estate documents. Most importantly, sellers should know when appraisal is required, how to handle appraiser report, and house “not appraised” conditions. Thus, this is an important tool for home buyers and seller to have in their tool kit.

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Festus Okolie

Festus Okolie

I am a Texas licensed Real Estate Agent and Realtor you can trust. I provide hassle-free real estate services in Dallas-Fort Worth Metropolitan area in Texas. I help home buyers and sellers achieve their real estate goals. I take particular interest in negotiating deals to benefit my clients.

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