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    What Home Sellers Should Know About Appraisals

    When selling your home, the appraisal plays a significant role in determining the market value of your property. The outcome directly affects the sale price as well as financing options for potential buyers.

    Understanding what appraisers look for and how their assessments affect your sale is important for setting realistic expectations as you prepare your home to sell. Here’s what you need to know.

    What Is a Home Appraisal?

    "A home appraisal is an assessment of a property's value conducted by a licensed appraiser. It’s used to determine the fair market value of a property based on various factors including its condition, location, size, features, and recent comparable sales in the area. Lenders typically require home appraisals to ensure that the property's value is sufficient to support the loan amount requested by the buyer." -Assessed vs. Appraised Home Value: What's the Difference?

    While lenders require a home appraisal to protect their investment, appraisals often serve every party involved as it ensures that the seller receives fair market value for the home and can help the buyer from overspending. 

    woman taking photo of home with iPadPhoto from Canva

    What Does a Home Appraiser Do?

    A home appraiser comes to your home and conducts a thorough inspection of the property. They make note of various factors to create an unbiased valuation of the home to share with all parties involved in the sale. 

    What a home appraiser looks for: 

    • Property condition: The overall state of the home, including its age, maintenance condition, and whether or not it needs any repairs.
    • Interior features: This includes the layout, size of rooms, quality of construction, and the functionality of the kitchen and bathrooms.
    • Exterior features: Curb appeal, condition of the roof, siding, and landscaping.
    • Upgrades and improvements: Any recent renovations or upgrades that may add value to the property.
    • Location: The property's proximity to amenities such as schools, transportation, attractions, community amenities, and the overall desirability of the neighborhood.
    • Comparable sales: Recent comparable sales (comps) in the area to gauge fair market value.
    • Safety and code compliance: Adherence to building codes and regulations.
    • Overall market trends: Real estate trends affecting property values in the area.

    man and woman looking at paperwork and laptop

    Photo from Canva

    What to do if your home appraisal comes back lower than you expected? 

    Low appraisals are caused by a variety of factors, mostly due to market fluctuations. If your home appraises for less than your asking price, don’t panic. While you should be aware that the low appraisal might kill the deal, it doesn’t have to. There are a few things you can do to move toward a successful home sale.

    First, ask for a copy of the appraisal to look through it line by line.  

    • Search the appraisal for errors. Are there any errors or omissions that could affect the value of your home? Did the appraiser leave the newly finished basement out of the appraisal? Did they say your home was a three-bedroom instead of a four-bedroom home?
    • Check which homes are used for the comparable analysis. Are they similar enough to your home to be used for comparison? Can you find reasons why some of them should not be used, or why other comps would be better?
    • Note any omissions of local real estate conditions. Review the appraisal for indications of local real estate factors that could contribute to increasing home values.

    After you’ve reviewed the appraisal and found notes for the appraiser, submit your findings for review (comparable sales, typed errors, overlooked upgrades, etc.) and request a second appraisal. If you don’t have enough findings to warrant an appeal or your request was denied, then you can move forward with the sale using one of the following methods. 

    person counting cash

    Photo from Canva

    How to Close a Home Sale with a Low Appraisal

    1) The buyer can make up the difference in cash.

    The lender considers the appraisal mainly in relation to the loan-to-value ratio. A low appraisal doesn't necessarily mean the lender won't provide the loan. Instead, they base the loan amount on the agreed-upon ratio in the contract at the appraised value. Sometimes, the buyer's lender may not allow cash to cover the difference, leading the buyer to pay some of the seller's closing costs instead.

    2) Lower the home's price.

    If the home is overpriced or the value was inflated, often this is the best solution. It makes the buyer happy and satisfies the lender. 

    3) Compromise on the value.

    Instead of asking the buyer to pay the entire difference, settle somewhere between a full cash contribution and completely lowering the price. Let’s say the difference is $10,000, you could agree to accept $5,000 in cash and lower the price by $5,000.

    If these options don’t work for either party, you may need to cancel the transaction. Many purchase contracts contain a loan contingency. If the appraisal comes in low, the buyer does not qualify to buy the property at the agreed-to terms in the contract. A properly written loan contingency allows the buyer to cancel the contract and requires you to release the buyer's earnest money deposit.

    The VA Loan MPRs versus Home Appraisals 

    If the buyer is using a VA loan, then there are MPRs, also known as Minimum Property Requirements, to satisfy. While similar, they are not the same thing as a standard home appraisal. 

    What are MPRs? 

    “VA has established Minimum Property Requirements (MPRs) to protect the interests of Veterans, lenders, servicers, and VA. Properties must meet these requirements prior to guarantee of the loan by VA.” - Veterans Benefits Administration

    While typical home appraisers assess the property to determine its value, Minimum Property Requirements (MPRs) ensure that military families purchase homes that are safe and sanitary to live in.

    What VA-assigned home appraisers look for: 

    • Marketable Real Estate 
    • Space Requirements
    • Access
    • Encroachments
    • Drainage and Topography  
    • Geological or Soil Instability 
    • Flood Hazard 
    • Coastal Barrier Resource System
    • Non-Residential Use
    • Zoning 
    • Water Supply and Sanitary Facilities

    For the full list of MPRs, visit Veterans Benefits Administration.

    It's often seen as a mundane aspect of home selling, but gaining a clear understanding of home appraisals empowers you to anticipate potential hurdles and navigate towards a successful home sale.

    Get even more home selling help with our free guide below: 

    Guide to Selling Your Home

    What Home Sellers Should Know About Appraisals

    Danielle Keech


    Danielle Keech

    Danielle Keech is a writer and content creator for MilitaryByOwner Advertising. She writes on military life topics, highlights clients’ open houses on social media, and manages the Military PCS Facebook group. She especially enjoys covering financial topics and helping military families exercise financial responsibility and plan for the future. Danielle has been a Marine Corps spouse for ten years (and counting!) and is a momma to four littles and one fur baby. She and her pilot spouse have lived in Virginia, Florida, Texas, California, Hawaii, and, most recently, Okinawa, Japan. And yes, you guessed it, Hawaii is her favorite duty station to date! Find MilitaryByOwner's Millitary PCS group here.

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