Home Appraisal 101!

Appraisals estimate a home’s value with fresh eyes

Just because you and the sellers have agreed on a price doesn’t mean it’s a done deal—your lender needs to be on board, too. After all, it’s the lender’s investment as well.

Enter stage left: The appraiser.

While the process is somewhat similar to getting comps—as you did to determine a fair price—appraisers delve in much farther to determine the home’s exact value.

They’ll investigate the condition, the square footage, location, and any additions or renovations. Another key difference is that when you looked at the comps, you were probably hoping for a specific outcome—perhaps even some flaw that you could use as a bargaining chip to lower the price.

Appraisers, on the other hand, are trained to be unbiased, says Adam Wiener, the founder of Aladdin Appraisal in Auburndale, MA. “I don’t care what anybody wants the home to be worth,” he says.“I’ll give you the answer. You may not like it, but it’s the answer.”

You’ll get a copy of the appraisal, too

Appraisers set out to determine if the home is actually worth what you’re planning to pay. You might be surprised how little time that takes; they could be in and out of a home in 30 minutes, and that’s not a reason to panic. Appraisers aren’t home inspectors, who examine every little detail. While they’ll pay particular attention to problems with the foundation and roof, appraisers also note the quality and condition of the appliances, plumbing, flooring, and electrical system. With data in hand, they make their final assessment and give their report to the lender. The mortgage company is then required by law to give a copy of the appraisal to you.

Appraisers work for your lender—not you

As the buyer, you’ll be paying for the appraisal. In most cases, the fee is wrapped into your closing costs and will set you back only $300 to $400. However, just because you pay doesn’t mean you’re the client.

“My client is the lender, not the buyer,” Wiener says. This ensures that appraisers remain ethical—in fact, it’s a crime to coerce or put any pressure on an appraiser to hit a certain value. Appraisers must remain independent. “Anything less, and public trust in the appraisal is lost,” says Wiener.

They protect buyers from a bad deal

In essence, an appraisal is meant to protect you (and the lender) from a bad purchase. For instance: If the appraisal comes in higher than your asking price, it’s generally fine. Sure, the sellers could decide they want more money and would rather put their home back on the market, but in most cases, the deal will go through as expected.

If your appraisal comes in lower than what you offered, this is where things get tricky: Your lender won’t pony up more money than the appraised price. So if you and the sellers agree on $125,000 but the appraisal comes in at $105,000, it creates a $20,000 shortfall. What’s a buyer to do? Read on.

A curveball appraisal isn’t necessarily the end

If the appraisal comes in low and your contract with the seller was contingent on an appraisal, you could walk away and have your earnest money returned. If you prefer to buy the home anyway (or waived your appraisal contingency), there are some other paths you can pursue:

  • Come up with the extra cash to cover the difference between the appraisal and offer price
  • Ask the seller to cover the difference
  • Challenge the appraisal and pay for a second opinion.

Keep in mind, though, that your new report could come out identical. Also keep in mind that if you do choose to walk away, that’s actually good news, although it may not seem like it at the time. Why? Because the appraisal kept you from paying too much for your home.

Once your appraisal is done, you’re still not ready to close without an inspection. Often the most nerve-racking part of the process, the inspection can reveal deal-breaking flaws like mold, foundation problems, and roofing issues. Learn how to survive the inspection in the next installment of our Home-Buying Guide next week.

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Quick and permanent fixes for scratched wood floors!

THE PROBLEM:

High-heel dent
THE FIX: If the heel left an impression without breaking the surface, you can steam it out. Fold a damp dish towel into quarters and lay it over the dent. Set a hot iron on the towel and turn on the STEAM function. After about a minute, check your progress. The steam should cause the wood to swell and even out the dented portion. If necessary, sand smooth and refinish to match the surrounding area. Warning: Steam can turn some floor finishes white, so test this method on a hidden part of the floor first.

THE PROBLEM:

Doggie nail marks
THE FIX: For shallow pet scratches, rub a small amount of tinted paste wax directly into the spot with a clean, soft rag. Let the wax dry, then buff the scratch and the surrounding area so that they blend seamlessly. If your floors have a darker stain, use a paste wax formulated for dark woods, such as walnut.

THE PROBLEM:

Dragged-credenza gouge
THE FIX: For a deep scratch that reveals bare wood, use fine-grit paper, working with the grain, to sand the scratch. Rub mineral spirits over the sanded area to pick up any fine dust. Using a plastic putty knife, fill the scratch with stainable wood filler. When dry, carefully sand away the excess with fine-grit paper. Stain to match your floors, then reseal the spot with polyurethane.

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Selling or just decluttering this Spring? A storage space may be your answer!

You might think the easiest way to declutter your home is to shove everything into the closets. Bad idea: Anyone who tours your home is going to check out the storage spaces, and disorganized, overstuffed closets only serve as evidence that your home is lacking. Opt instead for a storage unit to house the things you won’t need while your home is on the market. The general rule? Get rid of a third of your stuff. “If you don’t use it every day, store it,” says Justin Seeby, principal at the Graham Seeby Group with Keller Williams Intown Realty in Atlanta, GA. Holiday decorations, baby gear, seasonal clothes, that bread maker you’ve never used — they can all go into storage. Bonus: If you choose a portable unit, it can be transported to your new home, making moving day a cinch.