I come out swinging with my perspective on appraisals. Watch this week’s video to learn why, and more about what appraisals do – and do not – do for you. KitCrowne.com We are Licensed in NY, CT, VT, MA, ME, RI, NH, FL
Let’s start with an essential truth: whether you are a home buyer or seller, an appraisal doesn’t add anything but stress to the transaction. That’s a bare facts truth. What appraisals actually do is remove the element of mutual agreement between seller and buyer, and introduce the judgment of a third party as to what the “value” of the property is. Now, I’m a free market kind of guy so, from where I sit, I think appraisals are annoying, intrusive, nanny-state contrivances that oughtn’t exist. I also think that they’re required by the people who have the money I help people borrow so I accept that they are here to stay. That’s also a bare facts truth.
So here’s a list – in no particular order – of insights about appraisals that help frame their usefulness and currency to you:
- Appraisals have no lasting value – they only fix a value to your home for a moment in time. That’s because appraisers use the sales of similar houses that sold in the last several months in the same area and, as time goes by, there will be newer sales – higher or lower – that will be more relevant. That means that if a bunch of your neighbors sell their homes for $100k less than you paid for your home, the value of your home just fell… for the moment.
- Likewise, if an appraisal comes in higher than the sales price, there’s no cause for celebration and, no, you don’t really have a bunch of equity in your new home. It just means that on a comparative basis, there’s more value than the sales price you agreed upon with the seller. It doesn’t, however, mean that the home would actually sell for the value that the appraiser inferred for the property.
- An appraisal isn’t a home inspection but the appraiser is there to make sure that everything that is supposed to work – lights, heat, water, waste disposal, and the like – actually does work and that the home is safe to live in. You may be prepared to buy a house that has functional challenges but the appraiser is the one who will decide if you are allowed to buy the property in its present condition.
- The appraiser doesn’t work for or share information with town officials but they will check to see if work that has been done to the home has been properly permitted by the building department. So that basement that has been finished or the shed that’s been built or the wood stove that’s been installed, or the countless other things that get done to a home by their owners, well, if it was done without a permit, that’s a problem that has to be resolved before the sale can be completed.
- Appraisals don’t get shared with anyone other than the lender without your permission. That means that the seller doesn’t get a copy of the appraisal report, or the town, or your ex-spouse, or – well, the list goes on.
- And here’s a weird one: the appraisal doesn’t belong to you, it belongs to the bank. So, even though you paid for it and you have a right to receive a copy of it, you bought it for the bank’s use exclusively. I can’t tell you why that is, just that that’s a fact of life when it comes to appraisals.
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