- The Washington Times - Friday, October 12, 2001

After the searching, after the contract, after the loan application comes the appraisal. The appraisal is the traditional ceremony of determining whether you paid too much for the property or nabbed yourself a great deal.

Technically, it's to protect the lender from lending too much money on a property. If your real estate agent has done a good job of providing comparables and negotiating the contract, you won't have this problem.

A lender wants to be sure the target property is worth as much money as the buyer is going to pay for it. For the buyer, a low appraisal could jeopardize the transaction, especially if the borrower is stretched for cash.

Generally, if an appraisal for a property is too low, the lender may not approve the loan for it. A lender will approve a loan up to just a certain percentage of its value, traditionally 80 percent ($80,000 on a $100,000 property). If that property comes in at $95,000, the lender still will provide a loan, but the buyer may have to come up with additional money to honor the contract for a $100,000 price.

If the contract is contingent on a satisfactory appraisal, the buyer may be able to negotiate the price down. The seller may consider this a viable option because once the property has been appraised at that amount, more than likely, the same appraisal might come in with another contract. It's better to cut the price and move forward with the settlement.

Another option is for the buyer and seller to split the difference $5,000 in this case. The seller reduces the price by $2,500, and the buyer comes up with an additional $2,500. If there's no money to be had and the buyer really wants the property while the seller is fixed on the price, the seller needs to work on challenging the appraisal.

First, to prevent having a low appraisal, a seller should prepare the house for the appraiser as if the appraiser were a hot buyer prospect. The appraiser isn't just going to consider the price and make an offer, she or he is going to set the real price of the house. Make it show its best.

Clean up, shampoo the carpets, paint, touch up, mow, trim and do all the things that make a house look its best. The appraiser is going to determine true value. If after all this fixing and cleaning, the appraisal still comes in too low, move to Phase 2.

In Phase 2, you and your agent conduct some more homework on your community. More than likely, the appraiser has looked up the past few sales that have settled, but go ahead and get them together. In addition, look at them very closely do they match your house exactly?

The appraiser may have looked at tax records, but they can be fraught with misidentified properties. Your house may have three bathrooms when all the other houses had only 21/2. Do you have a finished basement or addition the other houses don't have?

These items can make a difference to your favor in an appraisal. Also, look at properties that may have sold before yours but that have not yet gone to closing. What were the prices and descriptions of those properties, and could they help increase the value of your house?

Most appraisers know their business and will conduct a thorough appraisal of the property, but if you think the appraisal should have come in higher, don't just complain to the appraiser, provide the background the appraiser needs to bring the price where you want it to be.

M. Anthony Carr has written about real estate for 13 years. Send questions or comments by e-mail ([email protected]).

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