5 Things You Didn't Know About Your Real Estate Appraisal
By Matthew Roberts, Certified General Real Estate Appraiser
1. Your Appraisal Is Not a Guess
The appraisal is an opinion of value based on the most recent comparable data available. While it is an opinion, it must be a reliable result based on credible analysis and methodology. This is why the appraiser asks lots of questions. Having the most relevant information is critical to developing a good real estate appraisal.
2. Your Appraisal Is Not Set in Stone
If you believe your appraiser is mistaken, by all means say so. If you are aware of a comparable property which sold recently, which the appraiser may have missed, please share the information. The appraiser can analyze it and determine if an adjustment is needed.
3. If the Appraisal Is for the Bank, It Might Not Be for You
Bank appraisals are not completed for the benefit of consumers or home buyers. They are owned by the bank and used only for their lending and collateral risk decisions.
They cannot be used by any other party, including the borrower, or for any other use. And they may not satisfy the appraisal contingency in the purchase contract unless correctly identified.
The natural response by the borrower is "But I paid for it!"
Don't believe me about this? Listen to what the American Bankers Association has to say about the bank appraisal:
"Although there may be some ancillary consumer benefit to a bank-ordered appraisal, the reality is that, in real estate transactions, the appraisal is not ordered for the benefit of the consumer, but rather, for the benefit of the lender. Consumers may, and are often advised to, obtain an appraisal for their own use as outlined in the Purchase and Sale agreement." –American Bankers Association
What does that mean for the borrower?
4. The Bank's Appraisal May Not Satisfy the Appraisal Contingency in Your Purchase Agreement
Consumers and investors often rely on the appraisal ordered by the bank to make a purchase decision. However, in the bank's appraisal, the bank is the sole intended user of the report, and not the contract buyer or seller.
Because the bank appraisal is the bank's alone, it may not satisfy the appraisal contingency if one is specified in the purchase contract. This is why it is important for the buyer to obtain an appraisal to satisfy their own due diligence.
Real Estate Appraisals
5 Things You Didn’t Know
What every buyer, seller and borrower should understand before relying on an appraisal.
It’s Not a Guess
An opinion of value backed by credible analysis and the most recent comparable data.
It’s Not Set in Stone
Share a recent comparable sale the appraiser may have missed; it can be analyzed and adjusted for.
The Bank’s Appraisal Isn’t Yours
Bank appraisals are owned by the bank and used only for its lending decisions.
It May Not Satisfy Your Contingency
The bank is the sole intended user, so its report may not meet your purchase contract’s terms.
The Fee Isn’t Based on Value
The appraiser is paid for time and complexity, not a commission on your decision to buy.
Farm · Commercial · Home appraisals | Missouri · Illinois · Iowa
5. The Appraisal Fee Is Not Based on the Value
It is easy to overpay for a property, and no one will stop buyers from doing so. The only protection for the real estate consumer comes in the form of an appraisal performed by a licensed appraiser acting as an unbiased third party.
The appraiser's fee is based on the time required and complexity of the project. An appraiser is the only party involved in the transaction that is not commission-based. Every other party involved only gets paid based on your decision to buy.
How the Appraiser Is Paid
The Fee Isn’t Based on Value
The appraiser acts as an unbiased third party, with nothing riding on your decision.
Every Other Party
- Commission-based
- Paid only if you buy
The Appraiser
- Not commission-based
- Licensed, unbiased third party
Farm · Commercial · Home appraisals | Missouri · Illinois · Iowa
Get Your Own Independent Appraisal
Getting an independent appraisal is the only way to accurately determine the market value of your real estate investment. Tell your real estate agent and lender, "I need to get my own appraisal," and base your purchase and investment decisions on your own information. If that is something you need, we can help you with that. Contact us today.
