Whether you are a home buyer or seller, an appraisal is a key part of the whole process. And in many cases, a real estate valuation, an appraisal, seems to be purely arbitrary and overly complicated.
Fundamentally, though, an appraisal is data-driven: it is simply an opinion about a home’s value derived from similar housing data and neighborhood data. That’s why you need to stop believing these four home appraisal stories in Massachusetts.
1. The Appraiser Works for and is on the Side of the Buyer
A common misconception is that the home appraiser works for the buyer and that, as a result, the valuation will be skewed in favor of the buyer. This misconception is actually quite far from the truth. While it is true that the buyer does, in fact, pay for the home appraisal, the appraiser actually works for the lender. The lender is the one who hires the appraiser and owns the work they produce.
It doesn’t matter if the buyer and seller have already reached agreement on a price. The buyer’s lender is also making an investment, so everyone needs to be on the same page. It is, in fact, a criminal offense for anyone – either buyer or seller – to pressure or coerce an appraiser into coming up with a certain value. Further, appraisers – unlike agents and inspectors – are answerable to government regulatory agencies.
In the end, it’s important to remember that the appraisal process is a critical component of the real estate transaction. Everyone needs to be on the same page and respect the appraiser’s role in determining the market value of the property. Without an accurate appraisal, the buyer and seller may not have an accurate understanding of the true market value of the property and could be at risk of entering into an unwise transaction.
2. More Amenities and Bigger House Mean Higher Valuation
When it comes to appraising a home, there are many factors to consider. Upgrades, improvements, many amenities, and lots of square footage don’t necessarily translate into a higher valuation. A home appraisal just isn’t that simple.
The value of a house is calculated on the basis of sales data for similar homes in the neighborhood. So if a house is more amenity-filled and much larger than all others in the neighborhood, then the appraiser won’t have any sales data to work with. In that case, the larger home with all the bells and whistles may not be appraised for what the parties involved think it’s worth. Basically, if surrounding houses (that have been appraised and/or sold) were built on the lot of the house in question, that’s what would be used to determine its appraised value.
In conclusion, the value of a house is determined by comparing it to similar homes in the neighborhood. If the house is more amenity-filled and much larger than all others in the area, the appraiser won’t have any sales data to work with and the value may not be what the parties involved think it’s worth. Ultimately, the market value of the house may be higher than the appraised value if it has features that are not common in the neighborhood.
3. An Appraisal Equals a Home Inspection
Another appraisal story floating around out there is that a home inspection is the same thing as a home appraisal and vice versa. Although both inspectors and appraisers inspect a property to determine its condition, the similarities end there. It’s true they are both safeguards for the buyer and lender, but they have different purposes.
A home inspection is a visual evaluation of the condition of a property, inside and out, performed by a qualified home inspector. This inspection is designed to identify existing or potential problems, such as structural deficiencies, roof problems, plumbing or electrical issues, environmental hazards, and other issues that could affect the value of the property. The inspector will also check for safety issues, such as carbon monoxide, gas, and smoke detectors, as well as check the overall condition of the property.
A home appraisal, on the other hand, is an estimated value of a property based on its condition, the local housing market, and other factors. An appraiser will assess the condition of the home and the neighborhood, as well as analyze recent sales data to determine the fair market value of the home. This is an important step in the home-buying process, as it helps the buyer and lender agree on a price for the home that is fair and accurate.
4. There’s Nothing You Can Do About a Low Home Appraisal in Massachusetts
When trying to sell a home, the appraisal process can be a major hurdle. Often, the home will appraise for much less than the seller had hoped. It can be a huge disappointment, but unfortunately, it’s par for the course.
Fortunately, if you are a seller and the appraisal comes in much lower than expected, you do have recourse. It’s important to bear in mind that mistakes do happen – mistakes that can severely jeopardize a potential deal.
In such a case, the homeowner, the seller, can – and should – contact the buyer’s lender and request another appraisal. Before you ever reach that stage, though, you should, according to real estate experts, get an appraisal of your own done before the lender’s appraisal takes place. Keep in mind, too, that federal law stipulates that a copy of the appraisal must be supplied to consumers who submit a written request.