5 Essential Strategies to Mitigate Appraisal Risk When Selling Your Home

Remember folks, the last major obstacle in getting your house sold is usually the appraisal.  If the property appraises below the sale price, the deal could fall through or cost you thousands of dollars.  Here are 5 essential strategies that I employ to put you, the seller, in the best position possible:

1. PRE-NEGOTIATE THE APPRAISAL: Negotiate how much of a potential missed appraisal the buyer is willing to pay for in dollars or percentage. This is not binding, but it is effective, especially if you were working with multiple offers.

2. TAKE THE DEAL WITH THE BETTER CASH POSITION. If all other items in the deal are relatively equal, it makes sense to mitigate risk by taking the deal where there is more equity.

3. MEET THE APPRAISER ON SITE FOR THE PHYSICAL INSPECTION: Based on the appraisers I’ve asked over the years, roughly 80% of listing agents skip this critical step.  Your agent should meet the appraiser at the property with comparable sales defending the sale price and the agent should also use this opportunity to tell the appraiser how many offers were received and how competitive they were.

4. ANSWER ANY QUESTIONS THE APPRAISER MAY HAVE. The last thing you want to do by not attending the physical inspection is to have the appraiser guess on conditions they may find.  The roof looks old, does it leak? I see some water stains, how often does the basement flood?  When the agent is able to answer these questions, it can help prevent the appraiser from making incorrect assumptions that could lead to unnecessary repair requirements which can be a nightmare days before closing.

5. CHALLENGE ANY ERRORS IN THE APPRAISAL: If the appraisal doesn’t come in at value, your agent can challenge the appraisal by looking for material errors, not subjective ones. A subjective disagreement is unlikely to be changed.  Here are a couple examples of material errors I’ve dealt with:

• Rather than showing up in person to do the inspection, an appraiser sent a photographer to photograph the property. The photographer completely missed the finished bedroom on the 3^rd
• I’ve had appraisals use comparative sales without making appropriate adjustments for room size, bedroom count, condition, etc.
• Measurements were done drastically wrong making the house seem much smaller than it actually was.
• The appraiser neglected to put in price adjustments for 3-9 month old sales at a time when prices were rising over 2% a month.

Your home is almost always your biggest asset.  Always interview at least 3 listing agents before making the critical decision of selling your home.