Myth No. 1: An appraisal is the same thing as a home inspection
Although both the appraisal and the home inspection are used as safeguards for the buyer (and the buyer's lender), don't confuse thetwo. Home inspectors and appraisers have completely different jobs. Sure, they both poke around your home. But the inspector's job is to uncovereverything that's problematicor could potentially become problematicwith the home, while the appraiser's job is to find the objective market value of the property. Got that?
To do thejob, the appraiser will use comps (the same thing you used to determine your list price), but that's just for starters.Appraisers take into account a home's condition, square footage, and location. Appraisers also note the quality and condition of the plumbing, flooring, and electrical system.With data in hand, they make their final assessment and give their report to the lender.
Myth No. 2: The appraiserworks for the buyer
The buyer pays for the appraisal, but the appraiser works forand is hired bythe lender. Itdoesn't matter if you and the buyers have agreed on a price. The buyer's lender needs to be on board because it's the lender's investment, too.
But don't fear: Even though the appraisal is meant to protect the buyer's lender from a bad deal, appraisers aretrained to be unbiased and ethical. In fact, it's a crime to coerce or put any pressure on an appraiser to hit a certain value.
Myth No. 3: An appraisal will give you the magic number of what the buyer willpay
The appraisal process isn't an exact science. In fact, the appraisal is only oneopinionof what your home is worth. It doesn't dictate how much the buyer should pay, or how much the seller should accept.
So what happens if the appraisal doesn't match the contract price?
If your home is appraised lowerthan the price you and the buyer agreed upon, the lender isn't going to pony up more money to make up the difference. Instead, it'll be up to you and the buyer to figure out who pays for the shortfall. Can the buyer throw inmore? Or do you, as the seller, need to cover the difference just to make the deal go through? Well, let the discussions begin.
Myth No. 4: The bigger the house, the higher it will appraise
Consider a supersized home built on an average-size lot in an otherwise modest neighborhood. Although the home might dwarf its neighbors, that doesn't mean it will be appraised for that much more than neighboring homes.
The value of the home is measured as if it were similar to others in the area that would commonly be expected on that same lot, Buchele says. In fact, some people might consider the bigger home more of a burdenafter all, theres more to be heated, cooled, insured, and maintained.
Myth No. 5: The more bells and whistles, the higher the appraisal
Wait a minute: What do you mean your $100,000 investment in fancy appliances isnt worth $100,000 extra in the appraisal? OK, take a step back. This situation can be hard for sellers to wrap their heads around. But if youve overly improved your space with amenities that don't exist in surrounding homes, theres no nearby sales data the appraiser can use to decide just what those amenities are worth.
And that goes for your dcor, too. You might think your home is worth more because of the impeccable vibe that you or your stagerhave given the house. But appraisers aint got time for decorating divas. They make a straight value judgment on the quantifiable aspects of the housethat is, the square footage, number of rooms, and other measurabledata.
Myth No. 6:All amenities are created equal
Ifyou've equipped your home with an in-law suite, a sexy Tiki bar, or a home exercise spacethat actually makes you want to work outwell, we applaud you. But if you converted your garage to do so, don't expect the home appraiser to give you props.
Your house has a garage for a reason, points out Austin Fernald, a home appraiser in Orange County, CA. Most people want to park their cars where they are safely protected from the elements and break-ins, he says.
The moral of the story? Be careful any time you remove one amenity in order to add anotherit mightcome back to bite you in the appraisal.