Whether you’re selling your house because your moving, retiring, upsizing or downscaling, the amount of money you can get out of your home is going to make a difference to you. Most of the time sellers settle on an asking price without really knowing the market value of the home.
That comes later after you’ve found a buyer and accepted their offer. The lender will order an appraisal, which means that someone who’s been trained and licensed will evaluate your home. The goal is to see if it’s worth the amount that you and the buyer have agreed on.
This is an important part of the selling process because lenders don’t often give loans if the house doesn’t appraise well. Most of the time, homes appraise at or above the asking price, but sometimes it just doesn’t happen. When your home doesn’t appraise for a high enough value, what do you do next?
There are a few things you can try. First, go over the final appraisal report to look for any typos or clerical errors. Sometimes a number might have been entered wrong, and that could throw off the final calculations. A clerical error shouldn’t keep you from being able to sell your house.
If you can’t find any errors that would lower an estimated value of your house, take a closer look at the comparables. A comparable is a house similar to yours and in your general location that has recently been sold. Usually, comparables have been off the market for the past three to six months.
As you look at the comparables, take note of areas in which your house differs. If it’s about the same and these houses sold for significantly more than yours appraises for, ask why.
Also look to be sure the comparables are in your neighborhood, how much like your home they really are, and how long ago they sold. As you prepare to sell your house, consider talking to an insurance agent to see if there are location hazards that you weren’t aware of, such as being in a flood zone or earthquake zone.
It could be that there are no homes quite like yours in your area or that the comparable data is old and not relevant anymore. In order to sell your house, you might need to find updated information.
If you’re really unhappy with how the appraisal came out, you can ask for another appraisal. You’ll have to pay for it yourself, and the lender and buyer aren’t bound to use the information that might turn up. However, just getting that second opinion might give you peace of mind.
If you do decide to order a second appraisal, take the cost into account. Some statistics show the range for appraisals is about $450-$750. Home advisor lists the range as $300-$600, with a national average of about $325.
If you order a second appraisal, try to work with an independent appraiser from the local area rather than one from an appraisal management company. This could make all the difference in getting an appraisal that allows you to sell your house.
Many lenders use appraisal management companies to hire appraisers, but there’s no guarantee that appraisers hired through a management company are familiar with your area. If you’re falling short in the comparables area, this might be one reason to consider.
There’s a chance the buyer will be willing to pay the difference between the selling price and the appraisal. In this case, they would put more money down in the property to pay the difference, and you could still sell your house quickly.
You could also split the difference in order to sell your house, with the buyer paying half by adding extra money to the down-payment and you paying half by lowering the selling price by that amount.
If all else fails, you may have to resort to lowering your price to the appraisal price or risk losing the deal. How important is it to sell your house right now? Is it better to let this deal fall through and try to attract another one?
At this point, you might be asking what other options you have.
If your deal falls through, you do have a few other options for selling your house. At this point, if you haven’t already got a second appraisal, it might be a good idea to get one from an experienced appraiser that you choose yourself.
If you’re still under contract with a real estate agent, you could consider putting the home back on the market for the appraisal price. If you’re in a hurry to sell your house in order to eliminate high mortgage payments, you could even drop the price below the appraised value and advertise it that way.
If all you want to do is get out from under the debt, you could try to sell your house to someone who flips homes or to a real estate investor looking for properties to fix up and then use as rentals. Often these buyers will pay cash, but they also often pay lower than market value.
If you’re in a hurry, working with a flipper or a real estate investor might not be a bad idea. The deals generally go through quickly, you don’t have to work with a lender (so you don’t have to wait for your money) and you are paid cash for your home.
This option probably won’t work unless you’re an expert DIY handy type of person, and you have time and money to invest in your home. If you do, you might enjoy renovating your house yourself now so that you can sell it for a higher price when local market values go up.
Both increasing market values and improvements made to the house can increase its appraisal. Of course, it’s probably easiest for you if you can avoid a low appraisal to begin with—but what makes a home appraise well?
While you don’t have any control over the general market value in your area, there are some things you can do to help ensure that your home has its best chance of being valued well. Knowing what to expect, using some elbow grease, and investing a little time and money can make all the difference.
If your home didn’t appraise well, take some time to review how the appraisal process works. The appraiser does both a home walk-through (it takes about 20 minutes) and measures comparables before writing the final report. Is there any way you can help them?
While it won’t make a difference in the market value itself, it might make a difference in how they perceive you, and by extension, your home. Be courteous and helpful when they come for the walk-through, and make their jobs as easy on them as you can.
Did you install a new dishwasher? Replace a cracked window? Switch out an aging light fixture for a ceiling fan? Build garden boxes or a tool shed? Any improvements or repairs you made can show that you’ve worked hard to care for your home and keep it updated.
Since many appraisals work in $500 increments, those small repairs can add up, too. Detail the list and make sure you make a copy for the appraiser to take away following the home walk-through.
Keeping your home clean during an appraisal is one way to show courtesy to the appraiser, who otherwise has to maneuver past your piles of laundry and dishes. It does have an impact on the appraisers’ outlook and the impression he or she gets.
Spend some time looking into houses that have sold in your area lately. You might have the advantage of knowing about some for-sale-by-owner homes that sold for good prices. Gather as much information as you can and save it to present to the appraiser when he or she comes for the walk-through.
Having your real estate agent tour the house with an appraiser can be good for both of them. The appraiser can pick the real estate agent’s brain regarding comparables (as well as see the files that you and possibly your agent put together on similar homes).
At the same time, this gives your real estate agent the chance to explain all the upgrades and repairs you have made to the house.
There’s something to be said about curb appeal, and even the appraiser will notice. Do what you can to make your yard look great. Mow the lawn, weed the gardens and clear away piles of debris.
If you have time and money, consider adding a few outdoor amenities, as well. Installing a swimming pool probably wouldn’t be cost effective at this point, but perhaps building a fire pit or a sandbox for children would be a good idea.
Make sure the light fixtures and outlets work. Fix leaky faucets, paint dingy walls and cupboards, and replace carpet that is torn or stained. Pay special attention to your foundation, your walls, and your roof, because the appraiser will look for structural integrity. Do what you can to make your house look sound.
Selling a home can be tough no matter what shape it’s in. If it appraises below market value, it might not be because it’s in bad condition. Perhaps the local market is flooded with foreclosures and shorts sales, so the available comparables just aren’t enough to show the true worth of your home.
No matter what the reason is, knowing what your options are when it happens can help you move forward when low appraisal happens. Likewise, knowing that there are things you can do to help your house appraise well can give you a chance to get the most when you sell your house even when the market isn’t favorable.