As a real estate agent, you may have to deal with appraisal results that affect your clients' transactions. Whether the appraisal is higher, lower, or equal to the contract price, you need to communicate the results effectively and professionally to your clients. Here are some tips on how to share appraisal results with clients in different scenarios.
Before you share the appraisal results, make sure your clients understand the appraisal process and its purpose. An appraisal is an unbiased opinion of value based on the market data, features, and condition of the property. It is not the same as a home inspection, which focuses on the structural and mechanical aspects of the property. An appraisal is required by most lenders to ensure that the loan amount is supported by the collateral value. Explain to your clients that the appraiser follows the Uniform Standards of Professional Appraisal Practice (USPAP), which are the ethical and technical guidelines for appraisers.
While all appraisals share similarities in assessing a property's value and condition, each type has specific requirements based on its corresponding loan program (FHA, USDA, VA) or absence of government backing (conventional). These distinctions ensure compliance with different lending guidelines and help lenders make informed decisions about financing options based on factors like eligibility criteria or adherence to minimum standards set by each program.
Once you receive the appraisal report from the lender or the appraiser, review it carefully and look for any errors or discrepancies. If you find any, contact the lender or the appraiser to request a correction or a reconsideration of value. If the report is accurate and complete, share it with your clients and walk them through the main sections, such as the property description, the comparable sales, the adjustments, and the final value. Highlight the positive aspects of the report, such as the features and amenities that add value to the property, and address any negative aspects, such as the condition or location issues that reduce value.
Depending on the outcome of the appraisal, you may have to discuss the implications and options with your clients. If the appraisal is higher than the contract price, congratulate your clients and reassure them that they are getting a good deal and equity in the property. If the appraisal is equal to the contract price, confirm with your clients that they are paying a fair market value and that the transaction can proceed smoothly. If the appraisal is lower than the contract price, explain to your clients that they may have to renegotiate with the seller, bring more cash to close, or walk away from the deal. Help your clients weigh the pros and cons of each option and advise them on the best course of action.
Sharing appraisal results with clients can be an emotional and stressful experience, especially if they are not favorable. As a real estate agent, you need to provide support and guidance to your clients and help them cope with the situation. Listen to their concerns and frustrations, empathize with their feelings, and validate their emotions. Avoid blaming or criticizing the appraiser, the lender, or the seller, as this may only increase the tension and conflict. Instead, focus on finding solutions and alternatives that can benefit your clients and protect their interests.
After you share the appraisal results with your clients, follow up and update them on the next steps and the progress of the transaction. If you have requested a correction or a reconsideration of value, inform your clients about the outcome and the response from the lender or the appraiser. If you have renegotiated with the seller, confirm with your clients that the new terms are acceptable and that the contract is amended. If you have helped your clients find another property, show them that you are committed and enthusiastic about their new choice. Keep your clients informed and involved throughout the process and maintain a positive and professional attitude.
FHA, USDA, VA, and conventional appraisals have distinct focuses and requirements. An FHA appraisal assesses a property's condition and value for financing through an FHA loan, ensuring it meets minimum property standards. A USDA appraisal determines if a property meets eligibility criteria for rural areas and agricultural financing. A VA appraisal establishes the property's value based on comparable sales and verifies its suitability for veterans' needs. A conventional appraisal evaluates factors like property condition and market trends for properties financed without government backing. While they share similarities, each type has specific requirements based on loan program or absence of government backing.