The last time I did a column about property appraisals was almost four years ago in the middle of the COVID-19 pandemic when the real estate market was all over the place and a fair appraisal was difficult to achieve. Fast forward to 2024 and things haven’t changed that much. An accurate appraisal is still difficult for some of the same reasons.
In 2020, property values were soaring as a result of people relocating to Florida during COVID and inventory was scarce. We still have some of that going on with values up and inventory low, although the inventory aspect is beginning to level off.
Whether you are buying a new home, refinancing your existing home loan, or selling your home, it’s important to assess the value of the property. A buyer’s lender uses an appraisal not only to assess the value of the property but also to determine such things as your interest rate and required down payment.
The property appraiser is only looking at the value of the property. Whether or not a buyer personally qualifies for the mortgage being applied for is secondary to the value of the property. However, the appraiser’s final value determination has a very profound effect on the mortgage being approved. For example, if the appraisal comes in short it will dictate the amount of mortgage the buyer will be approved for. In this case, the lender may ask for additional funds as a down payment from the buyer or ask the buyer to renegotiate the sale price, lowering the amount of the required mortgage. This is why the job of an independent appraiser is so important.
The appraisal fee is billed to the buyer and becomes part of their closing costs. The buyer is also entitled to a copy of the appraisal, which should be reviewed by the buyer for accuracy. Although appraisers are professionals who generally stand by their final analysis, they can make mistakes in square footage, lot size, updates, omissions and other provable details that could influence the property’s value.
In addition, one of the biggest disagreements on property appraisals is the comparable properties the appraiser has used to support the value. Since appraisers rarely go into a property for sale or one that has just closed, they can only decide by driving by and reading listing information. If you feel the value is incorrect and the appraiser will not make an adjustment, there are government resources where a complaint can be filed, especially if this is preventing the mortgage from being approved.
According to the National Association of Realtors, a critical issue impacting appraisals is appraiser shortages, similar to so many other job-related shortages businesses are experiencing. There are stringent educational requirements and regulations that add to the ability to recruit more appraisers. However, I recently read that appraisers are among the highest-paying trade jobs this year with a median income of over $64,000. I have met many appraisers and, in my opinion, it is a very nice career, especially if you have an interest in the real estate market, have a friendly personality and are computer savvy.
Appraisers are mandated to develop a report that is impartial, objective and represents an independent opinion of the value of the property. This is why home appraisals have always been more of an art than a science, now more than ever.
