Appraisals: What You Need to Know

An appraisal is a professional assessment of a property’s value, and it is a critical part of the home-buying (and refinancing) process. Before lenders will agree to finance a home loan, they want to be sure they can recoup their money, should the need arise. If you find a cute little house on the Westside of Ukiah worth $250,000, a lender will not finance a loan for $400,000 because if you default on that loan, they need to be able to sell the house and get their money back.

Since most people don’t make a habit of buying and selling houses, here are a few details you should know.

Who Pays For the Appraisal?

Usually the buyer pays for the appraisal; however, in some sales contracts a buyer may ask the seller to reimburse them for the cost of the appraisal at closing. When refinancing your home, you pay for the appraisal upfront, or sometimes it can be part of the closing costs that can be financed back into your loan.

How Do Appraisers Determine the Value?

Appraisers thoroughly inspect your house to review the square footage, how many bedrooms and bathrooms, the kitchen style, and the overall condition of the house. They also review the property’s location and other factors, including the recent sales price of similar homes in the area. Finally, appraisers must provide a “Condition Code” rating that reflects the integrity and condition of the house, based on a formula provided by the appraisal institute.

Who Gets to See the Appraisal?

On a purchase transaction, buyers should receive a copy of the appraisal at least three days before closing; however, it’s usually given to them a few days after the lender receives it. Neither the seller of the property nor the real estate agent typically receives a copy—unless the buyer provides written authorization that it’s okay to share it. If you are a buyer and you do not receive a copy of the appraisal, ask for it! If you paid for the appraisal you are entitled to a copy.

What If the Value is Lower than Expected?

If you are the seller, and the appraised value is lower than the sale price, you can either back out of the contract (depending upon the wording in the contract), or you can renegotiate the price. The buyer also has the right to renegotiate the sale price. If the appraised value is higher than the sale price, then the buyer gets a good deal and the seller must live with the agreement.

If you are refinancing and you think the value is too low, you have the right to appeal the value, provided you have additional information to help increase the appraisal value (i.e., other comparable properties that have sold or mistakes that the appraiser has made such as the wrong square footage or number of rooms). Appraisers are human; they make mistakes. Review the appraisal carefully, especially if the value is significantly higher or lower than you expected.

What Can You Do Before the Home is Appraised?

While you may not think small cosmetic changes should affect the appraisal, they can. The first impression of a home with good curb appeal can positively influence an appraiser’s (and buyer’s) opinion. Cut overgrown bushes, rake the leaves, pull weeds, and mow the grass. Inside the house, de-clutter the counter tops, cabinets and closets. Vacuum floors, wash tile floors and polish wood floors. If you have made improvements (e.g., new roof, deck, furnace, water heater, etc.), give copies of paid invoices to the appraiser before they make an inspection, especially if the improvements are readily visible.

If you’re wondering whether it’s in your best interest to refinance your home, contact your Realtor. They can help you.

If you have questions about real estate or property management, please contact me at or visit If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at

Dick Selzer is a real estate broker who has been in the business for more than 40 years.



Reasons to Be Optimistic About the Market

I was reading one of the many emails I receive daily, and I came across one from the California Association of realtors that was pretty good so I thought I’d share some of it. Basically, it talked about why there’s good reason to be optimistic about the housing market.

  1. Home values are on the rise. Prices are up about fifteen percent over last year at this time and it appears they’ll continue to rise. Increasing values give people confidence that buying a home is a good investment, and with home prices still well below their replacement costs, the housing market isn’t at high risk for the kind of “bubble” that burst a few years back and sent prices plummeting.
  2. More new households are forming. More households will require more homes. Since construction hasn’t kept pace with population growth, demand for real estate is higher than supply. More construction jobs give people confidence in the economy (especially if you’re employed by the construction business). Now, growth is a highly charged political issue in Mendocino County. In my opinion, if new houses aren’t built, the ones we have will become more expensive than they would be otherwise. On the other hand, with appropriate growth, we can create balance between supply and demand, thereby creating what people want at a reasonable price.
  3. Fewer people are losing their homes to foreclosures. We’re seeing fewer foreclosures for several reasons. First, if you were going to lose your home, it’s probably happened by now. Second, if home values are increasing, folks may no longer owe more than the value of their home. Third, with an improving economy, some people are able to make payments when they couldn’t before.
  4. Interest rates are low and it looks like they’ll stay low for awhile. Although rates have gone up recently, by historical standards they are still incredibly low. Why does this matter? Because you can buy more house with the same monthly payment.
  5. Consumer confidence is up. With high consumer confidence, it’s actually a good time to buy or sell. Consumer confidence is a funny thing. Just believing that things are better can make them better. One of the primary driving forces behind this confidence is low interest rates, along with an improving job market, stable political situation, and higher retail sales.
  6. San Francisco and Santa Rosa housing markets are improving. With markets to our immediate south trending upwards, traditionally, Mendocino County won’t be far behind.
  7. High rent payments are sending folks to the home buying market, and that’s a good thing. Because there aren’t enough houses to go around, more people are forced to rent – making the competition for rentals fierce. This increases the cost of rent payments and sends some folks who wouldn’t have considered buying a home into the market to do just that. An increase in homeowners is generally a reason for optimism. As we see an increased percentage of homeownership, we see changes in the community with people having more pride in their homes and their neighborhoods. This tends to create a nice upward trend, more people want to own their own home and that improves the market.

Next time I’ll talk about real property versus personal property, and why it matters. If there’s something you’d like me to write about or if you have questions about real estate or property management, feel free to contact me at or visit our website at Dick Selzer is a real estate broker who’s been in the business for more than 30 years.

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