The Shopper Real Estate: Appraisals and Home Buying


By Jess Barron, Lindsey’s Inc. Realtors
If you have purchased a home before or been around the real estate business you have probably heard of the appraisal process. This is something the average person typically does not give much thought to. In the real estate world, the appraisal can be the make or break part of a transaction. An appraisal can even be a “bad word” in real estate transactions.
A home appraisal is an unbiased estimate of the true, or fair market, value of what a home is worth. Lenders order an appraisal during the mortgage loan process so that there is an objective way to assess the home’s market value and ensure that the amount of money requested by the borrower is appropriate. Some people believe that the true market value is when a seller and buyer agree on a price. This may be true but the lender needs a way to assess this value of the property being purchased.
Appraisers, in Georgia, are regulated by the Georgia Real Estate Appraisers Board. Generally, the Georgia Real Estate Appraisers Board’s Appraisal Act requires appraisers to meet certain standards in order to conduct business and prohibits a wide variety of unfair trade practices. Appraisers must meet both education and experience requirements, complete an examination and undergo a criminal history report.

Most lenders will select their appraiser from a pre-approved pool or que of appraisers. You may want to ask your lender about their appraiser-selecting process when you apply for a loan. Local appraisers seem to have a better grasp for current conditions of the local real estate market. As part of the appraisal process, the appraiser will take a trip to see the home in person. The appraiser will look at factors like condition, upgrades, amenities, number of bedrooms/bathrooms, room size, ceiling height, lot size, etc. They may even measure the house to make sure the sq ft from the MLS and county tax assessor is correct.
The challenging part of the process for the appraiser is selecting appropriate and recent comparable sales near the property to create a value for the property. Appraisers will look for properties with similar factors as those mentioned above. The comparable sales need to be within a certain radius (usually a few miles) of the subject property, or the property being appraised. Appraisers can adjust and weigh the comparable sales to help create the value for the property being appraised. It is normal for an appraiser to use 3-5 recent sales to create a value for the subject property. Some properties are more difficult to appraise than others. For example, it may be hard to find a recent comparable sale for a 10,000 sq ft property on 100 acres. In that case, the appraiser will need to open up their criteria.
The “nightmare scenario” for a real estate transaction is a low appraisal. These are the two words that can keep a real estate agent awake at night. For example, you may have a $200,000 sales price for the contract but a $190,000 appraisal value on the property. In this case, you can choose to challenge the appraisal by providing additional comparable sales (maybe the appraiser missed a sale), re-order the appraisal, change lenders to have a new appraisal completed or negotiate the difference in sales price and appraisal value. It is up to the buyer and seller to negotiate, hopefully with the help of their agent, the difference between the contract price and appraisal value.
Jess Barron is an Associate Broker with Lindseys, Inc. Realtors and President-Elect of the Newnan-Coweta Board of Realtors.