This regularly-scheduled sponsored Q&A column is written by Adam Gallegos, Arlington-based real estate broker, voted one of Arlington Magazine’s Best Realtors of 2013 & 2014. Please submit your questions via email.
Q. We are buying a house and the appraisal just came back. The value they quoted is above the sales price we agreed to, but I noticed a couple errors on the appraisal report. For one, it listed the basement level bathroom as a half bathroom, but it is actually a full bathroom. Should we report this to the lender and appraiser?
A. I think that homebuyers get confused sometimes about the purpose of the appraisal. Unlike a home inspection that is in place for the protection of you the buyer, the appraisal is a requirement of the mortgage process to protect the lending institution. You’ll notice that they are the ones who chose the appraisal company.
They want to make sure that if they are going to lend hundreds of thousands of dollars towards the purchase of your new home, that it meets their basic criteria and the value is at least that of your contract sales price.
The appraiser is not performing a separate home inspection, but they are making sure that certain items are in place. They may even check that the appliances and vital systems within the home work properly. The condition of the home should be safe, livable and resellable. They are comparing the home to similar sales within a defined radius and timeline to determine the value.
Not to get too sidetracked, but appraisals are subjective. You can have 10 appraisers come up with 10 different values. The fact that your particular appraiser determined that the value is above the contract sales price means that you can move forward with the purchase without having to bring extra money to closing or trying to re-negotiate the sales price with the sellers. To learn more about how appraisals and appraisal contingencies work, please see my past article.
If the appraisal had come in low and you had evidence to dispute the appraiser’s sloppy work and miss-evaluation, then I would fully encourage you to challenge the appraisal. In this case there really is not anything to gain by reporting errors to the lender or the appraiser.
If you would sleep better at night having this cleared up then please go ahead and report the discrepancies. Based on what you have shared with me I don’t see how it can do any harm.
Thank you for this week’s question. Please keep them coming to [email protected]. This is also a great place to reach me for anyone looking to buy or sell a home in the Arlington area.
The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.