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Facts About Real Estate Appraisals

Appraisal:
 sales valuations, data on comparable homes, recent sales,
neighborhood details and local market trends.

See the Updated Value of appraisals
Experienced agents often come very close to an appraisal price with their CMAS, but an appraiser's report is much more detailed--and is the only valuation report a bank will consider when deciding whether or not to lend the money.

How can you prepare your home for appraisal?
Prepare for your home appraisal like you would for a home sale. You are in essence re-selling your home. Make sure all the maintenance you can do is done; this includes clearing and trimming the yard to painting the house - hopefully most of this was already done for the sale and should at most need only a minor touch up. Be polite to the appraiser and give them full access to your home; work with them not against. Inform the appraiser of your home improvements. Let them know about the new windows, new floors, the finished basement, etc. And finally, don't be caught off guard. Do your homework! Know what similar homes are selling for in your neighborhood. This is something that should be done before setting your selling price. But in case your home has been on the market for a month or two, keep your research current. Let the appraiser know about similar homes and what they have sold for, especially if you know why a particular home that is like yours sold for less, let them know why your house is different.

If not by appraisal, how do I set the price for my home?
Home sellers can set the price of their home with the help of an agent  using a comparative market analysis (CMA); the CMA is not a replacement for an appraisal but will give a good idea on setting an asking price, usually 5-10% more than the market price for your area

A Real Estate Appraisal helps to establish a property's market value
Appraisals are an Important Part of Your Buying and Selling Transaction –the likely sales price it would bring if offered in an open and competitive real estate market.
Your lender will require an appraisal when you ask to use a home or other real estate as security for a loan, because it wants to make sure that the property will sell for at least the amount of money it is lending.
A home valuation is estimated market value. It is not an appraisal. Use it as a starting point to determine a home's value

Appraisal provided;  data on comparable homes, recent sales, neighborhood details and local market trends. .

What if the appraisal is lower than asking price?
An appraisal that comes in lower then the asking price can jeopardize the loan and ultimately the sale. The lender will generally only loan up to 80% of the appraisers opinion of the home's value. The most common result is that the seller can lower their asking price. Or the seller and buyer can negotiate and meet at a price in-between. If the buyer still wants the home badly enough, they may put more money down; but this may still not guarantee their loan as the lender will still view it as negative equity. The final option is to dispute the appraisal.

Before disputing with an appraisal, do your homework. Look at the homes in your community that have sold in the last 6 months and see what the differences are that may make your home more valuable. Perhaps there is a sale that the appraiser missed, perhaps other homes do not have the renovations and improvements you have done, perhaps the appraiser is not familiar with your type of home or neighborhood, etc. Building this case may be a good idea even before the appraisal. This will prevent you from getting rushed by the timeline after the appraisal is done.  
This is something you can ask for your REALTOR(r) to help with as they usually have a vast knowledge of your market area. Once you have the case, present it to the lender. They will likely get a new appraiser or request the same appraiser to reconsider it. If you do not want the same appraiser, make sure to specify this and ask for a second opinion.

How Foreclosures Weaken Home Prices

Although some studies show that neighborhoods with strong foreclosure numbers see a rough drop of 1% in value, it’s not always due to sold value of the property. Often falling prices are due to buyers’ perception of the area, followed by a refusal to live in such neighborhoods, coupled with the previous owner’s extreme  neglect of the property.

Some foreclosure sales appear to self perpetuate. Soon as one home owner goes into default, others nearby seem to follow. If the owner in default is evicted or abandons the property, the lawn isn't mowed, deferred maintenance takes over and the deserted home falls into disrepair. Homes with no curb appeal and screaming for repairs do not sell for market value.

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