Updated: May 25
A common misconception is that the appraiser works for the buyer and that the valuation, as a result, is skewed in favor of the buyer. While the buyer does, in fact, pay for the home appraisal, the appraiser is actually hired by and works for the lender who owns their work.
It doesn't matter if the buyer and seller have already reached agreement on a price. The buyer's lender is also making an investment, and so everyone needs to be on the same page. It is, in fact, a criminal offense for anyone – either buyer or seller – to pressure or coerce an appraiser into coming up with a certain value. Further, appraisers – unlike agents and inspectors – are answerable to government regulatory agencies.
Upgrades, improvements, many amenities, and lots of square footage don't necessarily translate into a higher valuation. A home appraisal just isn't that simple.
The value of a house is calculated on the basis of sales data for similar homes in the neighborhood. So if a house is more amenity filled and much larger than all others in the neighborhood, then the appraiser won't have any sales data to work with. In that case, the larger home with all the bells and whistles may not be appraised for what the parties involved think it's worth. Basically, if surrounding houses (that have been appraised and/or sold) were built on the lot of the house in question, that's what would be used to determine its appraised value.
Another appraisal story floating around out there is that a home inspection is the same thing as a home appraisal and vice versa. Although both inspectors and appraisers inspect a property to determine its condition, the similarities end there. It's true they are both safeguards for the buyer and lender, but they have different purposes.
An inspector's job, primarily, is to detect any and all problems (and even potential problems) with a home. An appraiser's job, on the other hand, is to determine the objective market value of the same house. Of course, an appraiser will, just like an inspector, note the condition of wiring, plumbing, roof, and so on, but only as a means to arrive at a valuation for the lender.
4. There's Nothing You Can Do About a Low Home Appraisal in Sacramento Ca
Also, if you are a seller and the home appraisal comes in much lower than you think it should, you do have recourse. Bear in mind that mistakes do happen – mistakes that can severely jeopardize a potential deal.
In such a case, the homeowner, the seller, can – and should – contact the buyer's lender and request another appraisal. Before you ever reach that stage, though, you should, according to real estate experts, get an appraisal of your own done before the lender's appraisal takes place. Keep in mind, too, that federal law stipulates that a copy of the appraisal must be supplied to consumers who submit a written request.