The question every homebuyer asks is “Are we paying too much for this house?” It may be the home of your dreams, but if the cost is more than it’s worth, securing a loan or trying to sell it in the future could become a nightmare.

This is where an appraisal comes into play. Residential appraisers, typically employed by lenders, estimate the value of real estate involved in a loan transaction. A home appraiser provides a professional opinion on the estimated market value. This is different from the county appraisal done to determine property taxes.

Appraiser Steve Lagasse said that professional appraisers are required to be licensed or certified. There are three classes of licensing:

1) Licensed residential appraisers (least qualified)

2) Certified residential appraisers

3) Certified General appraisers (most qualified)

Steve added, “The highest-quality appraisers meet more than the minimum state requirements. They are members of the Better Business Bureau, and they affiliate with recognized professional appraisal organizations like the Appraisal Institute or the American Society of Appraisers. The most-qualified appraisers for residential work generally have the Appraisal Institute’s SRA designation. The most-qualified General appraisers have the MAI (Member Appraisal Institute) designation.” 

Appraisals take place not only in real estate transactions; they may also be part of a property tax dispute, the disposition of an estate, or a divorce settlement. An appraiser typically starts with an on-site review of the property, where the home’s age, square footage, style, construction quality, location, and condition are noted, as well as the size of the entire property and special amenities such as decks, fireplaces, swimming pools, and security systems. After the on-site review, the appraiser will determine the actual value of the property, usually by comparing the past sales of similar properties.

What happens if the appraisal isn’t what was expected?  There are several ways to handle deal with it:

1. Challenge the appraisal: A real estate agent can provide additional informational and facts to support the sale price.
2. Get a second appraisal: This is a good move if the first appraiser was from outside the area and possibly not familiar with the specifics of the home’s location.
3. Negotiate a new price: See if the sellers are willing to come down in their asking price.
4. Pay the difference: If the seller doesn’t want to negotiate, the buyer can pay the difference in cash to meet the agreed-upon price.
5. Cancel the contract: Most sale contracts have an appraisal contingency clause or a loan contingency clause that allows the buyer or the seller to cancel the deal.

Steve said, “Appraisers provide informed value opinions. One way to feel comfortable about an appraiser’s value opinion is to either have it reviewed by another qualified appraiser or get a second appraiser’s independent opinion. I’ve been party to contentious situations where three appraisers were used: one for each party, and then a third, independent appraiser to reconcile.”