How to Answer 10 Common Seller Appraisal Questions

You tell your client they have a full-price offer for their home. “Amazing!” they say.

You tell your seller the home inspector found no issues during inspection. “What a relief!” they say.

You tell your seller that it’s time for the appraisal. “Sorry, what?” they ask.

Ah yes, the appraisal process. Standard procedure for real estate agents, and a part of the home selling process that clients so often forget about.

That’s why agents often find themselves at the receiving end of dozens of the same appraisal questions from confused and concerned sellers.

Whether you’re a new agent or simply want to improve your client service game, this post is for you. Here’s how to answer 10 of the most common seller appraisal questions.

“But the Inspection Went Well. Why Is an Appraisal Necessary?”

An inspection and an appraisal are two separate processes. If a home inspection ensures that a property is physically sound, an appraisal ensures that the home’s value is sound.

An appraisal validates the accepted sale price of the home, to make sure it’s appropriate given the current market and the particulars of the house.

Mortgage lenders require an appraisal before they agree to provide buyers with the loan necessary to officially make the purchase. They need to make sure the property is indeed worth what both the seller and the buyer agreed it was worth.

“Does the Appraiser Work on Behalf of the Buyer?”

Not exactly.

An appraisal needs to be successfully completed in order for the buyer to access the financing they need to complete their purchase of the home. The cost of the appraisal is a closing cost that buyers must cover.

But the appraiser is actually a third-party professional that the mortgage lender contracts to conduct the appraisal, to make sure the mortgage they’re about to offer is appropriate.

“Who Is the Appraiser?”

Appraisers are third-party entities in the real estate buying and selling process who are responsible for providing an informed and unbiased assessment of a home’s value.

While appraisers don’t need to be licensed in many parts of the country (Alberta, Nova Scotia and New Brunswick are the only provinces that require licenses), they do need to be skilled professionals.

According to the Canadian Real Estate Association, “appraisers need to know acceptable principles of appraisal and related information. They need to have practical experience, technical education, good judgment and some knowledge of mathematics, accounting and economics.”

“When Does the Appraisal Happen?”

An appraisal appointment happens after an offer has been accepted, after the inspection has taken place, and, of course, before the buyer actually takes possession of the house.

“What Happens During an Appraisal?”

An appraisal is part physical visit to the property, part research.

During the home visit, the appraiser will walk in and around the home, ask questions, take notes, and photograph the interior and exterior. The appraiser won’t inspect all elements to make sure they’re in working order, though they will note any areas of potential concern.

During the research component, the appraiser will review other listings in the area (both active and inactive), as well as recently sold homes.

Based on the findings of their research and visit, they’ll compile a report with their determination of the home’s market value.

“What Information Does the Appraiser Base Their Appraisal On?”

A variety of criteria, including but not limited to:

• Location
• Amenities
• Number and size of bedrooms
• Roof condition
• Deficiencies
• Capital improvements
• Date of upgrades
• Sales data for comparable properties in the area

“Will the Appraiser Keep Our Home Upgrades in Mind?”

It all depends.

If a seller lives in a historic home and recently upgraded the plumbing to modern standards, that’s a fact the appraiser will keep in mind.

Alternately, an expensive kitchen renovation might not mean anything to the seller’s report.

As the Appraisal Institute of Canada states, “the return on investment depends on the contributory value, or value add, of the renovation and tends to vary from market to market. The contribution to value is determined by the actions of buyers and sellers which is something that must be analyzed and estimated in the local market.”

“Can We Do Anything to Prepare for the Appraisal?”

Not much. It’s a listing real estate agent’s job to make sure the appraiser has all the information they need to make their report — including information about upgrades and comparable sales in the area.

If the appraisal is happening after a successful home inspection, then it’s safe to assume everything in the home is in working order.

Aside from making sure that things are working as they should, with no glaring cosmetic issues (old water stains on a ceiling or missing floor tiles), simply make sure your home is looking its very best.

Touch up any paint, remove clutter, and clean, clean, clean.

“Can We Talk to the Appraiser?”

Like you wouldn’t follow a potential buyer of your home around an open house, you shouldn’t crowd an appraiser as they’re trying to do their job. Trying to influence their opinion by volunteering information they haven’t asked for isn’t a wise idea.

If they have any questions, they’ll ask the listing agent first. It’s the responsibility of the agent to give appraisers all the right information.

“What If the Appraisal Is Less Than the Accepted Offer?”

Sometimes, appraisers disagree with what the buyer and seller decided was a fair price, and think the house is worth less.

In that case, buyers can come up with the difference between the accepted purchase offer and the appraised value (since the mortgage offered by the lender will be less than the purchase price). Or they can opt for an appraisal by a different lender.

Sometimes, buyers and sellers renegotiate the sale price and enter into a new contract. And other times, though it’s more rare, the sale falls through completely.

 

What misconceptions do you think buyers have about the appraisal process?