Appraisals allow for homeowners and buyers to establish what is fair market value of a property. In addition, an appraisal allows a lender to know how much they can safely lend.
According to The Appraisal Institute, a global membership association of professional real estate appraisers, “Appraisals are especially important because they are an objective and unbiased source of information. Unlike others involved in real estate transactions, the appraiser is an independent professional who performs a service for a fee rather than for a commission.”
This process, however, can be trying and even frustrating. Recent declines in the housing markets have spawned scapegoats across the industry, including appraisers. And increased caution from lenders has slowed the buying process.
“Too many consumers in this struggling real estate market face problems with appraisals when attempting to buy or sell a home,” said Appraisal Institute President Joseph C. Magdziarz, MAI, SRA. “But rather than passively endure delays in closing a sale, homeowners and buyers can take proactive steps to avoid pitfalls.”
To reduce your stress during this time, consider these simple tips from the AI®.
- Understand the role of appraisals. It is neither in your interest nor the interest of your lender for you to purchase a property that is over-priced for its value.
- Make sure the lender hires a qualified appraiser (such as a designated SRA, SRPA or MAI member of the Appraisal Institute). The lowest priced appraiser does not necessarily equate with the most qualified. This is a time to get the numbers right.
- Accompany the appraiser during the inspection of the property if possible. The more active of a participant you are in the process, the more you will understand it, and be able to catch any errors.
- Request a copy of the appraisal report from the lender. Federal law requires that you receive a copy of the appraisal within 30 days.
- Examine the appraisal report and ask questions. Be sure to examine the report for errors. According to “Appraising the Appraisal: The Art of Appraisal Review,” 2nd edition, common errors in appraisals include: misuse of adjustments to comparables, disregarding special financing and concessions, or miscalculation of gross living area.
- Appeal the appraisal if appropriate. Market conditions do change, especially in these economic times. If you feel that new information may change the appraisal, be sure to contact them!
- Ask the lender to order a second appraisal by a qualified and designated appraiser.
- File legitimate complaints with appropriate state board or professional appraisal organizations.
For more information on appraisals, you may wish to visit The Appraisal Institute’s website at www.appraisalinstitute.org.
Courtesy of Realty Times