Chapter 2 in our series: What Kills Pending Real Estate Sales.
Imagine you’re buying a home in 2006, and it has an appraised value of $600,000. You purchase it for $535,000. You’d probably be happy with that deal. Now imagine 5 years later, you want to sell…and the new appraisal comes in at $350,000! What happened? Bad economy? Crack dealers moved in across the street?
No…a very nice house across the street, occupied by very nice people, was subject to a short sale. Without bothering to look deeper, the appraiser took the sale price as a “comp”, and that artificially drove down the appraised value of, well, all the houses in the neighborhood. No sale.
In a complicated real estate picture, the science of appraisal is looking more like modern art…and not in a good way.
The moral: the things you think are routine, are often anything but.
3 Tips for getting the appraisal right the first time:
Pick the right appraiser for the job:
Is the appraiser local? Does he or she know the neighborhood? Have other people been happy with the appraiser’s work? With all the volatility in the market these days, appraisals have to be more “tuned” to the local market.
Get more than one appraisal if you have doubts.
You get another opinion before you have a major medical procedure. It doesn’t mean you don’t trust your doctor; it’s just that more information is better. Buying or selling a house is one of the biggest decisions you’ll make in life. Spending a little more can pay big dividends, in peace of mind, and in real dollars.
Make sure the comps are really comps
The real estate market upheaval in recent years has “skewed the data” for home values in many areas. As per the example above, one short sale or forclosure that goes unnoticed can muddy the waters. If you see comps that don’t look right to you, dig deeper.