Never trust your seller's appraisal

<<>> I drove by a home the other day. There was a big sign out front. “Home appraised for $235,000, now $200,000.” The next day, my assignment was to appraise a bank owned home. My appraisal was significantly less than what the bank had appraised the home for. Here are two clear examples when the appraisal was completed for two separate types of properties. In both cases, the home value was disclosed, but the time the appraisal was completed is not disclosed. This brings me to the first reason why you should never trust your seller’s appraisal.

The first reason why you shouldn’t trust your seller’s appraisal is because the value of your home will change with time. Each appraisal will have an effective date when the appraisal was completed. As interest rates fluctuate and seasons change, so does the value of your home. In most cases, you do not know what day the home appraisal was completed. The comparable sales may be 1 to 1.5 years old and the home is still stating “just appraised for.” Would you want to pay full appraisal price for a home when market values are moving downward and the value was determined over a year ago? Unless you can look at the effective date of the appraisal, neither you nor the seller knows what the new home value is.

The second reason you shouldn’t trust your seller’s appraisal is the seller may have influenced the value of the appraisal. Look, I run across this every week of the year. I’m refinancing a home and the borrower will be talking to me. “The other appraiser pushed my home value a bit, but it should be pretty close.” Or how about “Can you ignore the repairs for the kitchen,” “My cabinets are at my neighborhoods house being painted.” said the borrower. The bank thinks my appraisal is a low ball appraisal to help the buyer and I’m pretty sure that the value that the bank has is prefabricated or too old of an appraisal to be considered.

The third reason is that you need to be sure that the appraisal that is completed is the correct value. Sometimes value will fluctuate and markets value can change fast. Sometimes appraisers will appraise the same home and come up with significantly different prices based. What if the builder in your market area is going out of business and they need to sell nine homes at wholesale prices. The best way to determine the value is to get a second opinion of the home value. If the opinion differs significantly, you and the owner will have to decide which appraisal is correct. Recent, similar sales that offer similar design, appeal and functional utility should all be considered. Be careful, because if you’re thinking the seller’s appraisal is correct and you agree to buy the home, you will be paying for this mistake for 30 years.