Sellers, the importance of understanding the appraisal process

Real Estate Agent with Keller Williams Realty

I hear it all the time,

 But my home has several upgrades and updates, vaulted ceilings, hardwood floors, granite, new appliances... the list goes on. 

What does this all really mean with the sale price and the ability to get a contract? 

To put it plain and simple all of those upgrades add the desirability. Yes, it adds value your home, because you will receive an offer much quicker than the another home that does not have the upgrades and is in comparison. It enables you to have more negotiating power, that is where your value comes in.

The reality in our current market conditions is the N VA market is demanding a higher price as we see multiple offers and escalations. This is coming to play because of the law of supply and demand. Lack of inventory, great rates, motivated buyers are frustrated with little to choose from.

The appraisers job is to prove what HAS HAPPENED to the market, ie, past tense. NOT what IS HAPPENING. 

When I go on a listing appointment and I am showing the potential competition within an entire zip code, and there are only a few homes in comparison. Yes, could we list at a higher price and most likely get that number, more than likely. BUT, remember that appraiser? They are looking at what HAS SOLD (previously), it doesn't matter that you may receive multiple offers with escalations. It also does not matter that you are upgraded. The appraisers are not able to take "normal" upgrades and updates in to much consideration because they have to rely on tax records and agent photos of the previous listings.

The importance of understanding the appraisal process and listing your home at the proper price is crucial to your NOT "chasing the market" If you list to high, be prepared to negotiate when that appraisal comes back. It is very difficult and most of the time impossible to contest an appraisal. Don't be a market chaser, it can cost you thousands of dollars listing to high and having to reduce. 

Comments (89)

Thomas McCombs
Century 21 HomeStar - Akron, OH

Appraisals are largely subjective, after all. There are a lot of rules as to how they should be done so that all appraisers are operating on the same set of assumptions, but as no two houses are exactly the same, no two appraisers can do things exactly the same. So there will be differences, and sometimes those differences can hurt a seller.

Like any profession, some lawyers, doctors, accountants, Realtors or appraisers are better than others.

Dec 18, 2012 05:58 AM
Beverly Herdman
Keller Williams Realty - Culpeper, VA
Northern VA Wine Country Experts

Mary #51, I was heading down the page to reply to Mary when I saw Ric #61. You said it all Ric, There was also another comment about the distance of the appraiser. I lost it in all the posts, but absolutely Appraisers just like Realtors, there are a lot out there, just going through the motions and accepting appraisals that are not in there area of expertise. Our biggest problem is appraisers in a complete different MLS systems than ours, hours away from the subject property. 

Dec 18, 2012 08:46 AM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude


You made some excellent points and generated some good discussion from a range of people. Glad to have some appraisers chiming in on a touchy subject, particularly these days. I'm thankful that I have not had any appraisal issues, for whatever reason, in the last couple of years, but sure know people who have, and deals that have gone south.

Appraisals are a key item to talk about with our sellers early on - I see some excellent talking points here - time for a marketing piece.


Dec 18, 2012 08:57 AM
Dagny Eason
Dagny's Real Estate - Wilton, CT
Fairfield County CT, CDPE Homes For Sale and Condo

Great discussions here in this good post.   I love these posts that get carried away with fabulous commentary that twists and turns along the way with various discussions.

Dec 18, 2012 11:48 AM
MaryBeth Mills Muldowney
TradeWinds Realty Group LLC - Braintree, MA
Massachusetts Broker Owner

I always say it is the appraiser who determines the selling price, not an emotionally attached buyer or seller!

Dec 18, 2012 12:51 PM
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Beverly,  Sellers understand pricing far better when they are educated about the appraisal process. Great post.

Dec 18, 2012 02:15 PM
Mary Thompson
Lanier Appraisal Service - Flowery Branch, GA
Lake Lanier Appraiser in North Georgia

Thanks guys for your support those of you who read my post #51 and who understand our plight

No question there are appraisers out there who have no business in your market area. The lenders really are trying to crack down on distance travelled. Also in past year they did change the process to make it more standardized. That is why you see Coding in reports such as C-1, 2, 3 or Q 1, 2, 3. That is the Uniform Appraisal Data Set which came to pass where we must comply with the definitions that fall within these codes for Quality and Condition. There are other coding systems throughout the report which serve to make the appraisal more consistent between appraisers and less subjective. But remember this is an ART not a science. 


Again thanks for your support. Merry Christmas everyone!

Dec 18, 2012 09:49 PM
Chris Marquez
Charleston HOME Properties ~ - Sullivans Island, SC

This post and comments was very insightful and helpful.  We recently had a multiple bid/offer listing.  The good news on this property was that the winning offer came without an appraisal contingency.

Dec 18, 2012 09:54 PM
Beverly Herdman
Keller Williams Realty - Culpeper, VA
Northern VA Wine Country Experts

Mary, Is there anyway of requesting for it to be a local appraiser?

Dec 18, 2012 10:02 PM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Beverly, as we slowly recover from the real estate great recession in Florida, low appraisals are one of our biggest obstacles

Dec 19, 2012 01:00 AM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Wonderful reminder that appraisers use SOLD information, not active or pending.  They do make their adjustments and if the other homes do not have the granite kitchen counters, the vaulted ceilings, they will adjust for that. 

Dec 19, 2012 04:00 AM
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg Real Estate

Valuable advice about chasing the market downward. Especially important going into the winter months in the Midwest region.

Dec 19, 2012 06:45 AM
Charles E. Jack, IV
Charles E. Jack Appraisal & Consulting - Las Vegas, NV

I believe we should report what IS happening and I believe many appraisers believe that and try to live by that as well.

Are there folks out there in today's "cattle-call, lowest fee, quickest turnaround" appraisal environment that don't consider what IS happening? (I.E. current market observations and trends.)

Answer = Yes

If you want somebody to consider a lot of stuff including pending transactions, listings, off-MLS data, current trends, etc., then one must ensure that you are hiring educated and competent personnel that are being adequately compensated for their time and efforts in the assignment.

Most of these residential appraisal fees now offer pay that it is competitive with the titles "Pizza Delivery Boy" and "McDonald's washroom attendant".

Ergo, your mistaken belief that appraisers only report what HAS happened. (i.e. only forensic market past.) Appraisers should be reporting and considering everything that is available. Unfortunately, their most likely excuse is likely to be that the market is not paying them enough to go to all the trouble.

Charles E. Jack IV, MAI - NV & AZ Certified General Appraiser

(Also licensed broker / salesman in NV)

Dec 19, 2012 07:12 AM
Charles Stallions Property Manager
Charles Stallions Real Estate Services - Pace, FL
Pensacola, Pace & Gulf Breeze Property Management

Sounds like some great problems to have and with your 59 day selling plan wow. Here we are lucky to sell in 159 days

Dec 20, 2012 12:43 PM
Monique Ting
INET Realty Honolulu, HI - Honolulu, HI
Your agent under the sun

We are also in a crazy seller's market with not enough inventory to meet the demand.

I just had a very pleasant surprise on one of my recent transactions where I represented the seller of a condo unit. All of the recent sales in the condo were well below our contract price and I had prepared the seller for an appraised property value that would come lower than contract price. She was ready to lower her asking price by $5,000.

As I put the property on the market, both the seller and i were hoping for a cash buyer so that we wouldn't have to deal with an appraisal. We were extremely happy to find out that the appraiser came to a property value equal to the contract price. Aloha!

Dec 20, 2012 04:53 PM
Mary Thompson
Lanier Appraisal Service - Flowery Branch, GA
Lake Lanier Appraiser in North Georgia


The lenders or AMC's that the Banks hire to order the appraisals are the ones who must choose the appraiser and decide who is best qualified. No one else can ask them to use Local Appraisers, it is up to them to determine and use the best qualified appraisers for the assignment. 

However, great pressure by Realtors, Buyers and Sellers has been placed on the Lenders to obtain the most competent Local appraisers and they have made changes in how far appraisers can travel to an assignment, etc. Not all lenders do this but many do!

The problems arises here: When appraisers sign up with lenders and AMC's they are supposed to indicate in which areas they are competent to serve. Unfortunately some appraisers say they cover and are competent in most every single county in their given State! We all know that is not possible!

Also, just so you know as part of USPAP, appraisers are REQUIRED to decline any assignment for which they are not capable of handling, unless they can obtain the expertise they need through the help of others and they must report this help in the report.

So your best defense if a value issue arises is to find out just how many reports that particular appraiser has competed in your area and make them prove their competence. At least you can ask the Lender to double check that apprasier's competence when you feel they lack the experience in that market. FANNIE MAE requires that the lender use only appraisers competent to perform the task. So lenders need to make sure this happens and You as Realtors can continue to put pressure on them.


Hope this helps a little!

Dec 20, 2012 10:17 PM
Beverly Herdman
Keller Williams Realty - Culpeper, VA
Northern VA Wine Country Experts

Mary, what great valuable information you have provided. that is a blog in and of itself. Thank you for your expertise, it is greatly appreciated. You truly stand apart from a lot of appraisers. 


Dec 20, 2012 10:35 PM
Lenn Harley
Lenn Harley,, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I believe that appraisers would be able to provide more accurate valuations if the listing agent would do their job.  When a listing agent advises the appraiser to "just go", they miss the opportunity and neglect the responsibility to present the home accurately by providing the comps upon which they relied to price the property and provide the appraiser with information and documentation about appraisable recent upgrades and improvements.

It's a lot easier to get an appraised value close to the contract price before it's delivered than to try to get it increased after the fact.

Dec 23, 2012 07:28 PM
Kenneth Rossman

What Len Harley said, expanded some...  You should provide the appraiser with all the needed info not only those comparables most like the subject (features, amenities w/pix if possible etc.) but also why other sales the appraiser is likely to find aren't suitable comparables with as much proof as you can produce - ie distressed sales or not arms length, fair to poor condition - citing specific defects etc. Also market evidence of an appreciating market - IE FHFA HPI or

Dec 25, 2012 03:51 AM
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

We have had this problem, but we are having fewer and fewer problems with the appraisals.

Jan 02, 2013 02:47 AM