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Low Appraisal? Listed Are Reasons Why You May Be Affected
THE PETRASHEK GROUP (612) 889-6496
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31 May Low Appraisal? Here Are Reasons Why
Posted at 14:30h in Advice for Sellers by Brittany Pomerenke
If you have experienced a low appraisal, you are well aware of the negative effect it presents for your transaction.  Appraisal standards and practices have changed quite a bit after the Housing Market crash. Follow this link to read the guidelines regarding appraisal standards which apply to all loans being sold to Fannie Mae and Freddie Mac.
There are several reasons your home may receive a low appraisal.
1. The value of your home’s sale was artificially inflated based on multiple offers.  I know it’s a dream come true to get multiple offers on the sale of your home.  If the purchase price is considerably higher than the list price, a low appraisal is a distinct possibility.
2. Your home is ‘over-improved’ for your neighborhood or area.  There are certain features which buyers love and will pay more money to have.  However, in today’s appraisals, these features are not given any substantial value.  This is true for stainless steel appliances, granite countertops, remodeled bathrooms, paver patios or other landscaping.
3. Lack of recent sales from which the appraiser can draw relevant comparison properties.  Sometimes there are no good comparison properties which have closed in your area within the past 6 months.  In this case, appraisers do the best they can to adjust properties to reflect your home.
4. Desirable location, views, and lot size can increase the price a buyer would pay for your home. However, it is rarely given any direct and significant value in an appraisal.  An FHA appraisal was done for a home that gave no credit to the fact the lot size was .67 of an acre. The appraiser had used comparison properties on standard 1/3rd acre lots.  He explained it this way: there are no comparisons in the past 6 months which have a large lot. Therefore, he cannot boost the value of the home because of the extra land.
5. The offer on your home includes the seller paying the buyer’s closing costs. This can mean the accurate value is lower than the purchase price.  This is especially true if the agreed upon price was over the list price in order to include enough closing costs.
We have spoken with several appraisers working in the south metro within the past year.  Each time they have been able to accurately define the reasons for a lower value. One appraiser had explained to us that he needs to deduct 1.5% for each month if the comparison property is older than 60 days.  When we find a comparison property from 6 months ago, the deduction can quickly deflate the value.
We’d love to hear from you! Contact us with all of your questions or comments.
Read what Sheryl’s clients say about working with Sheryl and the Selling South of the River Team!
Brittany Pomerenke is an RSS Agent working with Sheryl Petrashek of RE/MAX Results. She is based in Apple Valley and sells real estate all over the twin cities with a focus on the south metro.
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