When you’re buying a Denver home the appraiser holds the power to either make or break the sale. Since lenders approve loans based on appraised value not the contract price you could be left to pay the difference or searching for a different home. Below is a list of the top five things to look for at the Denver home appraisal.
What Can’t You Do?
You should know that there really isn’t much you can do to affect your Denver home appraisal. There are very strict guidelines that appraisers must follow, put in place by Fannie Mae and lenders that state that all appraisals must be placed in a database to confirm that all findings are accurate. These guidelines are actually a great benefit to you because they prevent home appraisal fraud caused by pressure from lenders that would inflate the home price. Keep in mind that some appraisers will actually appraise a home lower than it should be to avoid being accused of such fraud.
Know what Comparable Homes are Around
You can take the seller’s word that the home is worth what they say it is, or you can do your homework and know what comparable homes in the same Denver neighborhood are going for in the current market. Check recent prices online or speak with your broker or agent about other homes in the area to assess if the value is around what it should be. Take care to look for short sales and foreclosures in the area, as these can cause your appraisal to be considerably lower than your offer. You can avoid this simply by having your agent ask the lender to use a local appraiser, since they will be more likely to know the true value of homes in the area. While you can’t request a specific appraiser you can ask for an “experienced local” appraiser instead to help you get a home appraisal that fits the property and your offer.
Talk to the Appraiser Before the Report
Ask your agent to be present at your Denver home appraisal or to at least speak with the appraiser before the report is created. The agent can provide valuable printouts of recent sales in the area that help to justify the purchase price. Plus if they know of any concerning issues they can let the appraiser know before the report is created. For example, if the home next door has a mold issue, or the couple just divorced causing a short sale, both of which would cause the comparable homes to go for much lower.
Understand a Low Appraisal
There are a number of reasons that Denver home appraisals can be low; it’s your job to use your knowledge of area to inform the appraiser of any local factors that he may not know. A few issues that could impact appraisals are: home prices in the area increasing so quickly that sales from six months ago don’t accurately reflect the improvement. There aren’t any comparable homes in the area so homes from a less desirable area have been used as comps. The home that sold down the street overlooks power lines, whereas the home you want has a view of the creek. The basement is fully finished with bedrooms and a bathroom, which aren’t accurately represented due to the lower value per foot for space below grade. Last but not least, the home has a pool or high-end landscaping that failed to give the home a higher home appraisal.
Review the Report
It is your right to see a copy of the home appraisal report and you should review it as thoroughly as you do your bank statement each month. If you find any errors or omissions it should be corrected. Do not ignore these errors or omissions as they could give the home a higher value. You can ask for a revaluation if the appraisal does not land somewhere between the price and what you have agreed to with the seller. Keep in mind this is not always easy and will mean another appraisal fee.
You Denver home appraisal can either make or break the sale. It’s up to you to do your homework beforehand. Know what the appraisal entails, what you can do and what rights you have before you get to this stage of the game and you’re more likely to have a good appraisal process.