All APPRAISALS Are NOT Created Equal
Ever thought all home appraisals are straightforward? Think again! Today, we dive into five unique appraisal stories that highlight just how varied they can be.
Story 1. The Fixer-upper Appraisal
Earlier this year, I had a client who purchased a home with me in the Scotch 80’s. This is an older part of town off Charleston. This home was built in 1970 and most of the homes in the area are 50 years old. This home is mid-century modern and has a timeless appeal. We were pleasantly surprised to have the appraisal come over our accepted offer price. This is because the appraiser took into consideration some of the other homes that were remodeled and updated.
The area has properties sold in a range of values with remodeled homes selling for significantly more. The area is desirable, and investors and homeowners are remodeling and updating, bringing values up with those improvements. The rising tide has lifted the value of all the homes in the area, including this property.
Story 2. The Under-Appraised New Construction Home
I have a buyer currently that has fallen in love with a new construction home in Cadence which is a newer development in Henderson. The house had modern finishes, energy-efficient features, and all of the great things that come with new construction. When she submitted an offer through the builder, the track agent was insistent that the builder increased prices by $5,000 with each new phase and we will not have an issue with appraisal. However, when the appraisal came back, it was surprisingly $20,000 lower than lower than the purchase price. The reason? The appraiser used older comparable sales from the area, which didn’t reflect the rapid appreciation of newer homes or the unique features of this new home build.
When dealing with new construction, appraisals can sometimes lag current market conditions. When you use the builder’s lender, they will still require an impartial appraisal to be completed. It is not uncommon with new home construction for the appraisal to be low. When we signed the purchase agreement, I reviewed the builder contract clauses to ensure there is an appraisal contingency to address potential discrepancies between the selling price and appraised value. We negotiated with the builder to reduce the price, and my buyer still got the home she loves!
Story 3. The Divorce Appraisal
Another example is past clients of mine that were going through a contentious divorce. The couple were dividing assets, including their jointly owned home. The wife, who wanted to keep the house, received an appraisal that came in surprisingly low, reflecting minor defects and downplaying the home’s upgrades. The husband, on the other hand, hired a different appraiser who returned a much higher valuation, emphasizing the neighborhood’s rising market and the home’s potential. Both parties were left with conflicting appraisals, creating tension and distrust.
Divorce situations can be tricky, especially when both parties have a vested interest in the value coming in to suit their own goals. I eased tensions by meeting with them and providing a comparable market summary. I helped them understand market trends and the value of a balanced approach to prevent further conflict.
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Story 4. The Refinance Roulette
When interest rates were at 3% many of my clients decided to take advantage of lower interest rates by refinancing their mortgage. However, the appraisal came in much lower than expected. So, the lender required a slightly higher rate or for them to bring in funds at close of escrow
When a home is listed for sale, the appraisers has an idea of expected value by reviewing the contract and knowing the sale price. When homeowners are looking for refinance, there is no “sale price” provided to the appraiser.
When you are refinancing, it’s critical to prepare the home for the appraisal as they would for a sale. This includes making necessary repairs, freshening up the property, and making sure the home shows well. I guide my clients through this process by offering a walkthrough and suggesting ways to maximize the property’s value. As well as providing a comparable market summary for more clients to have an idea of value to expect.
The Estate Settlement Appraisal
I have a listing right now in Pahrump. It is an estate sale with over 10 adult children who are heirs to the estate. During the escrow, we found out that the home is located on expansive soil has structural problems. When we originally listed the home, we had no idea about the structural concerns. We listed the home for $475,000 and got into contract quickly. The buyer discovered the issues during the inspection and cancelled. We had an appraisal completed for the estate. The appraiser struggled to find comparable properties in the area with similar structural concerns. He appraised it for $475,000. We obtained a second appraisal for $425,000 as this appraiser was much more willing to deduct for suspected repairs. We reduced the price to $425,000 but still had issues. We kept getting under contract again with buyers cancelling.
When we got the bids for repairs, they came in between $85,000 to $120,000. We reduced the price to $385,000 and submitted the bids to the original appraiser who revised the appraisal to $385,000.
In this case we were looking for a LOWER value due to condition but you can also submit a list of improvements to help substantiate a HIGHER value. This is something we do for our listings by meeting the appraiser and bringing information for them.
When it comes to appraisals, it’s important to remember that property values are not set in stone; they exist within a range and can often be subjective. Factors like market conditions, unique features, and even the appraiser’s interpretation repairs can influence the final number. For buyers, sellers, and homeowners dealing with inheritance, divorce, or refinancing, these variations can have a significant impact. This is where a skilled realtor becomes invaluable. I provide market insight, guide clients through the appraisal process, and advocate for a fair and accurate valuation. By understanding the nuances of both the local market and appraisal standards, I ensure my clients are well-informed and positioned for the best possible outcome, whether it’s maximizing value or negotiating terms.
