As a homeowner, we pour hours and significant amounts of money into making our home not only comfortable and improving its functionality, but we also make decisions regarding how we personalize it as well. So when we put our homes on the market, it’s only natural that we want to price it high. After all, it’s your home.
Yet, when an interested buyer comes around and makes an offer, their lender may require a home appraisal before it will go through with the loan. Why do they do that? They do this because they want to make sure the house is worth what the buyer (and they) are paying. No one wants to pay more than necessary, right? Why, the home appraisal is such a big deal, 43% of contracts have contingencies regarding the appraisal. If the appraisal comes back that the house is worth less than asking, the buyer may want to renegotiation or cancel the deal entirely!
To avoid any setbacks (especially if you’re selling your house as-is), here is a simple guide that will prepare you for the appraisal process.
Home inspection vs. home appraisal
Typically during the homebuying process, the home inspection will be conducted before the appraisal. The home inspector will look at the home’s structural integrity, ensure the systems are working properly, and there aren’t any safety hazards.
The home appraiser doesn’t go so far in depth. They will look at the home, evaluate its fair market value and determine if the asking price is reasonable.
Home appraisers look for these things
The home appraiser doesn’t dig deep like the inspector does. They look at things like how large the plot is, the age of the home, how many square feet it has, number of bedrooms and bathrooms. They’ll also factor in things like any upgrades you’ve made (for better or worse, sadly), where the property is located, and they’ll even factor in the view!
Home’s worth is lower than the asking price
Should your appraisal come back that the house isn’t worth what you’re asking, you aren’t out of luck. You do have a few options! You have the option of lowering your asking price to meet the appraisal value. You could also negotiate with the buyer and agree to either cover closing costs, the down payment, or come to some other arrangement.
You also have the option of getting a second appraisal. The second appraisal could give you a different result. Just be aware that the second appraisal will need to be paid by you and that there is the risk of the second appraisal being lower, not higher, than the first.
How to have a good home appraisal
You can improve your chances of having a satisfactory appraisal if you take these preemptive measures:
- Take the time to clean every inch of your home. Pay special attention to scuff marks, dust bunnies, dirty or smudged glass, and so on. If you don’t have the time to do a deep clean, you could hire a cleaning service to do the work for you.
- Not only do you want to take the time to clean your home from top to bottom, you’ll want to pay attention to cosmetic repairs, like painting the walls and patching up holes, but you’ll also want to pay attention to things that date your home. For example, if you have carpeting in the bathroom (yuck!), you may want to replace it with tasteful tile. If your cabinetry looks like it came from the 50s, you can spruce it up with a new coat of paint and new hardware.
- Be sure to have all of your paperwork at the ready. These documents should include the paperwork outlining the size of the property, the age of the house, and proof of sales price. You’ll also want to include invoices of all repairs and upgrades, as they’ll help your case when trying to explain why you priced the house as you did.
The appraisal process can seem like another huge hurdle that needs to be overcome, but it isn’t something to fear. If you can’t see past your personal connections to the house and still want to price it high, ask your real estate agent for their advice. They can suggest a price that is competitive but also reasonable. You can’t go wrong with your agent’s advice!