What Happens When the Appraiser Comes Up with the Wrong Number?

Wrestling over the numbers is often challenging when it comes to the price of a home.  There’s the price the seller hopes beyond hope that he can get a qualified buyer to pay for his house.  There’s the price the buyer is willing offer to pay for the house, which is usually a different price than he’s actually willing to agree to pay for the house.  There’s also the price the listing agent (that’s the agent representing the seller) believes the house should be listed for if it goes on the market this week, versus what the listing agent believes the house will actually sell for should be listed this week. To close this seemingly insurmountable chasm, usually the sellers come down a bit from their dream price, the buyers come up a tad from their low ball offer, and an agreement is reached.  How long that take, how many counter offers have to go back and forth, and how much money is in a “bit” and a “tad” are unique to each transaction.  

Yet the fun with numbers doesn’t end here.  Unless the buyers are paying with cash, the appraiser gets to let the bank know the appraised value of the home.  The buyers’ lender orders an appraisal, then the appraisal company assigns the specific licensed appraiser to the job.  The appraiser contacts the listing agent to make an appointment to conduct the appraisal, which involves taking measurements, photographs, detailed notes on the condition, feature, amenities, improvement, additions, and noticeable defects of the home.  The appraiser comes with a handful of comparable homes that have actually closed//sold in the last three months, and usually the listing agent with also share the list of homes they used to work with the seller to set the sales price.  The appraiser collects all of this information and then moves on to write up the appraisal report.  

The appraisal report includes specific details of the “subject property” as well as the comparable closed sales.  The appraiser has to make value adjustments, to accommodate differences between the subject and each of the comps based on the contracted purchase price of the subject property.  Yes, the appraiser knows how much the buyers are paying.  These value adjustments are for a pool, a view, an extra bedroom, or upgrades that add or subtract from the value of the comp against the subject property.Then the numbers get balanced and there’s an adjusted sales price of the comparable to make it like the subject property.  If all the math works out, the comps support the contract price and everyone breaths a sign of relief.  

One of four things can happen when the appraised value comes in less that the contract price.  The buyers can make up the difference; the sellers can reduce the price; the buyers and sellers can split the difference; or the buyers can cancel.  Or the fifth option – the listing agent digs a little deeper and discovers that there are several value adjustments that the appraiser failed to include, and she can submit this evidence as a challenge to the appraisal and ask for an amended report reflecting an appraised value at the contract price or higher.  Then cross her fingers and toes that it get approved.

I'm Leslie Eskildsen, Realtor.


Email me. Leslie@MyMVHome.com

Helping you make the right move in Mission Viejo, Coto de Caza, Rancho Santa Margarita, Irvine, Laguna Niguel, Laguna Hills, San Juan Capistrano, San Clemente, Laguna Beach, Newport Beach, Dana Point, Corona Del Mar, and other Orange County communities.