Coaching Insider Tips: 4 Ways Home Sellers Can Maximize Appraisal Value (That Have Nothing to Do with Curb Appeal)
As featured in Inman News.
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| Image by krzysztof-m from Pixabay. |
In a perfect world, we will all buy low and sell high. Astonishingly, in some places, home prices have increased by 47% since the start of the 2020 pandemic, meaning many should be able to sell high.
Unfortunately, not all appraisals have kept up with such fast-rising values.
Sadly, some homeowners have had to enter long and tedious legal battles to realize what should have been a basic fair market valuation (like this example of a $340,000 home valuation difference, whew!). Frankly, there’s no hiding it – sometimes valid concerns with a home valuation may face dismissive pushback (instead of proactive policies) such as:
"In fact, it takes more time to order a new appraisal and by putting more cost on the lender, they can simply decide not to do business with the buyer."
That is an actual quote from pros that emphasizes the cost and time to the lender with no regard for the fair housing/lending rights of the client. God help us! No wonder some people (*cough* see lawsuits) have a disdain and distrust for the real estate/lending industry, but we can improve this!
In short, we all should be adamant that home sellers – BEFORE listing their homes for sale (or even refinancing) – understand what a fair appraisal encompasses. Although life’s not perfect, it can be fair in that selling one’s home should easily command the current fair market value.
When you (or others) silence your questions, you silence your options
But wait, when there appears to be a value deviation, if we ask questions are we just jumping to wild conclusions that possibly there is, at the least, a mistake and, perhaps at worst, bias?
No, not at all because the point of questions is to uncover, or as I like to say decode, what has led to the deviation. It does not definitively accuse the valuation of being wrong or a mistake but it does ask for an account.
Just like saying, “life isn’t fair” to children does not pass muster legally in real estate, similarly “because I said so,” and other defensive attempts to quash accountability do not work in the realm of fair housing (and lending). A glaring indication of a fair housing-centered milieu is the ability to welcome questions and not dismiss them.
Remember that (what we may deem as) underappraisals (low appraisals compared to current comps) do happen at times. However, questions create options and clarity, especially if these questions are asked proactively, in other words, before a situation arises. But when you (or others) silence your questions, you silence your options. Oof!
Let’s get into the proactive questions that can decode fair housing (and lending) for your clients. Based on such gnarly stats above, the following are four insider tidbits real estate pros should arm homeowners/investors with to ensure maximum, fair market profitability from their real estate sales.
What Fair Housing D.E.C.O.D.E.R.s know BEFORE selecting a specific homebuyer or refinancing
First, know sales comparables within the last quarter (6 months maximum). For most home sellers that are "informed neighbors" (I don't call it being a nosey neighbor -- we are simply informed), they already know which homes in the neighborhood sold recently and for how much. Truth be told, that usually is part of the impetus for selling. Still, providing those comps is paramount to passing “good agent 101” so I know this needs no explanation since you are a real estate rockstar.
Second, when considering a prospective homebuyer's offer, review with the homeowner who the loan is through (if it is not a cash offer) and that lender's policies regarding appraisal issues –– that is the difference maker that sets a committed, trusted professional apart from someone with simply a sales license.
The "O" in Fair Housing D.E.C.O.D.E.R. acronym means we real estate pros are "Options Brokers" -- not from a stock trading standpoint but from an "asking the right questions" perspective.
"The first sign of an educated person is that she asks more questions than she delivers" --Johnnetta B. Cole, past president of Spelman College
Thus, BEFORE COMMITTING TO A SPECIFIC HOMEBUYER (or refinancing), the homeowner/investor should know what their lender's process is if your client disagrees with the value by asking (or uncovering on the lender's site) the following questions:
If there are concerns with the appraised value, will the lender offer a complimentary reconsideration of value (which we informally call a second appraisal)? If not, the additional cost may be an impediment to the homebuyer proceeding.
Will that second appraisal be with a different appraiser (a fresh set of eyes) or can it only be with the same appraiser (who may not be amenable to new information)?
Will the buyer's rate be locked during the reconsideration process (since a rate change may make the home unaffordable for that specific buyer, making this an offbeat comedy of errors that create tears instead of laughs)?
Based on the buyer's loan type, does the appraisal value stay with the home? If so, for how long? For some loan types (e.g. FHA, VA, etc.), the appraisal value stays with the home as a quasi-public record for 6 months. Yeesh! If a particular lender does not have a robust policy in place to challenge an off valuation, then that's a long time to be stuck with a problematic appraisal.
Third, if the homeowner is not happy with the above answers (or never heard back) but still wants to proceed with the prospective homebuyer's offer (or re-fi), then be sure to have your local fair housing center on speed dial. There is also the Appraisal Complaint National Hotline (1-877-739-0096) -- lock that number in because there is a limited time frame to file a complaint (one-year statute of limitations in many instances, yikes!).
Fourth, as a real estate professional, if you want to go the extra mile for your clients, create a list of the various lenders that serve your area with their policies for each of the questions above. Of course, have a disclaimer that the information was last updated on ____ date and that confirming all information is still accurate is the homeowner’s responsibility to verify as part of their due diligence period.
Humans – during all points of real estate transactions – can make mistakes but the key is how robust of a policy is available to help correct and ensure appraisals are fair.
Dr. Lee Davenport is a real estate coach/educator and author (of including Be a Fair Housing D.E.C.O.D.E.R. and How to Profit with Your Personality). Dr. Lee trains real estate agents around the globe on how to work smarter with their unique personalities and how to “advocate, not alienate,” so everyone has access and opportunity in real estate.
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