Whether you’re buying or selling a home, getting an accurate appraisal is crucial. In today’s market, lots of factors can contribute to an appraisal coming in too low, including a lack of recent comparable home sales in the area and using appraisers from out of town.
According to Bankrate, the Home Valuation Code of Conduct, or HVCC, which went into effect in May 2009, has also contributed to the low appraisal problem as it prohibits Fannie Mae and Freddie Mac lenders from having direct contact with appraisers. This has resulted in many lenders working through appraisal management companies – AMCs – who utilize a pool of residential appraisers that include many with limited training and from areas outside of the property that is being appraised.
Bankrate offers the following tips for buyers and sellers to protect themselves from low appraisals:
– Request that your lender find an appraiser that comes from your county or at the very least, a neighboring county.
– Request that the appraiser have a residential appraiser certification and a professional designation, such as the Appraisal Institute’s senior residential appraiser (SRA) or member of the Appraisal Institute, or MAI, designations.
– You are allowed to meet with the appraiser when they inspect the home. Fill them in on any factors, such as short sales or foreclosures in the area, that could affect the comps.
– Use the Appraisal Institute site to get an appraisal before you list your home. You can also work with your real estate agent to accomplish this.
– Use the appraisal along with your real estate agent’s local expertise to set the right price for your home.
– Give a copy of your pre-listing appraisal to the buyer’s appraiser.
– If an appraisal comes in too low, in your opinion, don’t be afraid to question it. It’s possible that you can offer information that might have been overlooked.