How to Deal with Appraisals in a Hot Housing Market

How to Deal with Appraisals in a Hot Housing Market
by gregrussell

Our Oregon Private Lender Team Can Assist with Financing

Buying and selling real estate is a roller coaster, no matter which side of the deal you’re on.

An appraisal can make or break a deal for either party. And a hot real estate market can complicate appraisal results.

What is an Appraisal?

A real estate appraisal is a professional assessment of a property’s fair market value. A licensed appraiser inspects the property and uses comparables to produce an unbiased valuation. The appraisal is used in pricing and negotiating when buying, selling, or refinancing a property.

Appraisals & Your ROI in a Hot Real Estate Market

How do appraisals impact your ROI when the real estate market is hot?

Comparables – or comps – are real estate properties similar to the property you hope to sell or buy that have recently closed in your area. Characteristics like size, condition, features, location, and sale prices help appraisers assess “comparable” value.

Appraisers use comps that have closed within the last 90 days – not pending sales or listings. As a result, appraised property value can lag behind a hot, fast-moving real estate market, and an appraisal may not reflect the sale price you’re asking based on current market activity.

What can you do?

First, keep in mind that historically, a fourth of all offers are above the appraised value of a property.

Secondly, ensure that an appraiser is fully apprised of the value adds to your property and how it stacks up to comparables:

  • Make a detailed list of all home improvements and upgrades, including dates and expenditures. Include invoices and names of contractors.
  • Research recent nearby real estate sales. If you know why a property sold below market value (the owner took a loss to relocate quickly for a job), include those details.

Finally, prepare your property prior to an appraisal to guarantee a fair assessment of value.

Help avoid an overly low appraisal and improve your ROI: Know your local real estate market, stay informed, and communicate with your appraiser!

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