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Appraisals are funny things. Well, not exactly hilarious but they are viewed differently at different times by different people. For example, a seller wants to get the most out of their home as possible and work with an agent to come up with a price that will sell the home within a reasonable period of time for as much as the seller can get. The agent provides some research on recent sales of similar homes that have recently sold to come up with the right price.
On the other side of the appraisal fence is the buyer. The buyer wants to buy the home at the lowest possible price and makes an offer with the advice of their real estate agent. The buyer’s agent will perform a similar search of recent sales and suggest a price that will both be low but also accepted by the sellers. This is one reason why two parties look at recent sales for the opposite reason. One to justify a higher price and one to justify a lower one.
Appraising the Value
Licensed appraisers will tell you that appraising a property is a combination of art and science. When an appraisal is ordered through an appraisal management company the appraiser first does some research from the office before making a physical visit to the property. The appraiser looks at recent home sales in the area to get an idea of where the property’s value might fall. The initial figure is based upon the square footage of the home with adjustments made to compensate for slight differences between the subject property and recent sales.
For example, a home sells for $300,000 and is 3,000 square feet. That’s a value of $300 per square foot. Because homes can be similar but not always exactly the same, the appraiser will make adjustments based upon the existence or absence of certain features. Say that the appraiser discovers three homes that have sold within the previous three months and over the past year. One of the homes, considered the most similar comparable sale, has a similar floor plan and also sold for $300 per square foot. However, the subject property under contract also has a superior view with a glimpse of the ocean. The previously sold property has no such view and in fact has little to no view at all considering its location and fencing. The appraiser will adjust the value for the subject property higher due to the superior view. These are adjustments. Other adjustments that can be made can be the size of the lot, landscaping, trees, physical location, condition of the property or an upgraded backyard deck and pool.
While appraisers follow guidelines regarding what sort of amenities provide a specific amount of value. The “science” part has already been completed meaning the research has been performed and the home inspected. Yet the “art” part comes from the appraiser’s point of view. If you ordered two appraisals at the same time from two different appraisers it’s likely the values will be very similar but not exactly the same.
Your Property Taxes
Your property taxes are based in part by the property tax rate and by the estimated value of your home. But the county doesn’t send out an appraiser twice per year to appraise your property and provide a value. Instead, the county does its own research of similar homes in the area that have sold and compares those numbers with what they believe your property is worth. When you first bought your home in all likelihood the appraised value of your home is the same as the sales price. All the county needs to do is research public records for the sales price. But when you’ve owned your home for a few years, the county must research recent sales of other homes and assign an assessed value upon which to set your property tax amount.
Okay, but let’s say you get your property tax bill in the mail and the value of your property is much higher than what you think it is. You don’t have to sit back and take it, you can contest the assessed value. You can also contest the value if your appraisal comes in too low.
You’re in the middle of refinancing and you receive a copy of your appraisal from the mortgage company. The value is much lower than what you feel it is and in some cases the value comes in so low that a refinance is no longer an option.
If you want to contest your appraisal, you can, but you need to know in advance what you need to do. Whether the appraisal is too high or too low, it’s incumbent upon you to start your protest by completing a form referred to as a Reconsideration of Value.
You need to do your homework. You won’t have any luck simply protesting your value just because you think your home is worth more. Or less. Instead, you need to have data about recent sales of homes that have sold in your area that are similar in construction, age and condition.
The appraiser researched public records and provided a value based upon hard data and the appraiser’s opinion. When protesting an appraised value, there are some things you must do in order to achieve any level of success. The appraiser will look for recent comparable sales that are closest to you. You won’t be successful if you ignore recent sales in your neighborhood and report a sale that occurred in another subdivision. You should look for homes of a similar size. According to appraisal guidelines, similar sized homes should be within 20% of your property. Picking out much smaller or larger homes won’t have any effect.
Try and answer a few questions:
• Does the appraisal report the exact square footage of the home and your lot?
• Are all your property improvements noted and included in the report?
• Did the appraiser not include or ignore a recent sale in your area?
• Are the homes listed in the appraisal of similar age and condition?
If you feel your value is wrong, one way or the other, and you’re going to appeal, unless the appraiser really missed something, it may be an uphill battle. Before you get too much further into the appeal process, consider hiring your own appraiser to see what another opinion might say. Should a new appraisal be positive in your favor, you’ll have much more success with your appeal compared to doing it all on your own.
I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.
“Chad and his team are exactly who you want handling the financing of your home. Whether it be a new purchase or refinance, he and his team are one of the most professional, responsive group of people I’ve worked with. Buying a home can be very stressful and Chad and his team took all of the necessary steps to make the process as painless and as quick as possible. They are extremely knowledgeable, organized and have great follow through. You won’t ever be left wondering what the next steps are. I highly recommend him and will use him in all of our real estate transactions moving forward.”