Appraisals – We love them and we really dislike them!! One thing is for sure – The appraisal on your home in the Phoenix Real Estate Market would show a huge increase from a year ago – In fact, we now know that the late fall of 2011 was the market low – we have been on the way up ever since and the improvement is still on the upward momentum. Appraisals are not an exact science! In fact, an appraisal can be very subjective to the person doing the job. Of course, the homes used to compare have to have similarities to the subject property, but choosing those comps is where the variance can come. For instance, is a lot that backs to the golf course comparable to the house across the street that backs to the major street? What about a detached work-shop? – How much value does that add? Should a foreclosed home be used if you are comparing to a traditional homeowner that has meticulously cared for their home? If a pool cost $50,000 to install, why does an appraisal only show an increased value of $15,000 to $20,000? The business of appraising is not an exact science, and most Realtors are not appraisers – I am not! I can provide a market analysis and give my “opinion” on the value of your home. (A market analysis is free and an appraisal can cost between $300 – $500) Another Realtor could come and do the same thing for you and come up with a different number. The point is, when you are trying to place a value on your home – there can be be a difference of opinion. I tell everyone – I can certainly give you a range of pricing that I feel the home would sell for, but a homeowner knows their home much better than I do or even an appraiser– Collectively, a list price can be derived.
When the appraisal is done as a part of a sales transaction – and the appraisal does not come in as high as the purchase contract price – there are 3 options available to the buyer of the property:
- Ask the seller to reduce the price of the home (the seller does not have to reduce the price, but the buyer has the option of voiding the contract and receiving a refund of their earnest money)
- Pay the difference in cash between the purchase price and the appraised price (the lender will only lend on the appraised price or the sales price – whichever is lower)
- Negotiate the sales price after the appraisal – meeting in the middle!
For more information on appraisals – from the National Association of Realtors: